Don’t buy gold online for investments

Paytm gold offering is attractive, but opt for gold bonds if you want to save for future needs

One of the biggest problems in holding physical gold is the annual storage cost. Public sector banks charge upwards of ~1,000 annually and private banks offer it starting at ~3,000 for a year. Also, if you want to purchase physical gold, you have to buy minimum one gram.

To make physical gold holding more attractive, Paytm has started offering gold for as low as ~1 (around 0.0003 gram) and it also offers free storage facility for five years. The e-commerce retailer has tied up with MMTC-PAMP India, a joint venture between Switzerland-based PAMP and Union government-backed MMTC, for the service.

Over time, individuals can accumulate the yellow metal by buying in small quantities and ask for delivery once they have the metal equivalent to 1 gram or more. Alternatively, they can also sell it back online. “The prices are live. Once the customer selects the amount of gold he wishes to buy, the purchase has to be made within five minutes. Else, the price would change,” says Krishna Hegde, senior vicepresident, Paytm. As the metal is sold based on live prices, the buyer pays lower than the gold coins sold on ecommerce platforms.

“It works out to be a preferable option for those who still prefer to buy physical gold. For savers, sovereign gold bonds are the best choice. They can buy gold equivalent to one gram and also earn interest on it,” says Ajay Kedia, managing director, Kedia Commodities. The long-term investment product, sovereign gold bonds (SGB), would soon be available on tap rather than in tranches. “No other gold investment is as attractive as SGB. An individual can save through these bonds and buy physical gold in the future once they are close to their goal, like their daughter’s wedding,” says Kedia.

But if you are someone who prefers physical gold, Paytm’s prices can turn out to be slightly competitive. The online retailer was selling 10 grams of gold for around ~30,680. If you want to take delivery, you will need to pay making charge of around ~647 extra. The total cost comes to ~31,327. If you want to buy 24-carat 999.9 purity gold at an online website, it comes to around ~31,500 for 10 grams, according to Umesh Kedia, director, Om Gold. He sells gold online on ecommerce platforms.

Paytm also allows you to sell the gold back to MMTC-PAMP. If you sell 10 grams gold purchased at ~30,680, you will get ~28,790. This is a difference of ~1,890 or 6.2 per cent. According to Kedia of Om Gold, the difference is quite high. “The buyback prices would depend on the jeweller. But the customer can get a better deal at a jeweller to whom the individual has been going traditionally. He should be able to buy back 10 grams of gold by deducting ~1,000,” says Kedia.

When buying gold online, buyers need to check the parcel for damage or tampering before accepting it, according to the terms and conditions at the Paytm. “MMTC-PAMP (the seller) will not be liable for any loss or damage caused if the customer accepts the parcel despite it being damaged or tampered.” Resolving such disputes can be cumbersome.