In the event of redemption, sellers receive the maximum value of the gold in the form of a direct bank transfer or in the form of a pure gold bar.

Gold has been the traditional mode of investment and a marker of wealth and sustainability in South Asian cultures since time immemorial. It was the chosen instrument for planning succession and bequeathing wealth through generations and continues to be culturally significant even today. Although taking out a loan against gold jewelry to raise cash has been a popular way to get through tough times, selling old gold for cash or buying back unused gold is a tool that even buyers of ‘traditional gold do not take into consideration.

Trust deficit: An increase in the sale and redemption of gold has been observed in India over the past decade, but unfortunately it is mired by players who operate unsupervised and exist largely outside of institutional reach. The overall this market is more organized while in India absence of organized actors and the lack of confidence in autonomous the “gold buyers” stop consumers to liquidate their idle gold to raise capital for milestones like buying a home, expanding a business, or even getting your start-up started.

The lack of organized players in the buyout market has often led people to depend on local jewelers to sell their gold jewelry. These local jewelers depend on the touchstone method to assess the purity of gold and more often than not a customer runs the risk of losing 3-5% in value by switching to these options when looking acts to sell unused gold. If you lose such a large margin on valuation, your payouts will suffer even if you are offered a higher gold rate.

Smarter option: Selling old gold is a smart way to ensure cash flow if one is aware of the pros and cons. In the event of redemption, sellers receive the maximum value of the gold in the form of a direct bank transfer or in the form of a pure gold bar. If customers sell their gold to credible players, they are more likely to get the full value of their gold and incur a 0% gold loss. While traditional jewelers like Tanishq, Senco, etc. offer to buy back gold and exchange it for gold, MMTC-PAMP offers cash for gold and with its qualified staff and transparent processes, customers are more likely to obtain the full value of their gold and suffer 0% gold. loss.

Organized and credible brand stores are helpful here as they use equipment like German XRF (X-Ray Fluorescence Technology) for gold valuation. Customers can easily visit Purity Verification Centers which provide a transparent method of gold smelting and evaluation along with custom printed reports. While traditional stand-alone stores typically offer arbitrary gold rates, organized ecosystems take inspiration from global institutional bodies such as the London Bullion Market Association (LBMA) for the gold rate of the day. But the main customer concern of unlocking the highest value of old gold is not solved by simply offering a higher gold rate, there should be an intention and ability to charge for the valuation of products transparently.

Are you getting the true value of your gold with gold loans? As gold travels through the generations in the Indian family setup and sentimental value cannot be measured monetarily, the urgent need for cash drives people to lend their gold jewelry.

One of the major disadvantages of getting a gold loan is that gold is priced at less than the loan-to-value ratio (LTV) of the offered market price which is sub-optimal. The gold market determines the amount of the loan on the purity of the product – bullion, jewelry, coins, etc.

Since the current performance of gold determines the LTV, obtaining a loan may not always fully cover its needs. Once assessed, the borrower can only obtain up to 75% of the value of the gold he pledges. For example, a person who puts up gold jewelry worth Rs 1 lakh as collateral might end up taking out a loan of Rs 75,000 with interest rates as high as the personal loan. It can go down further if the value of gold is not assessed fairly because a large number of clients also expressed concerns about the assayer undervaluing the client’s gold prior to loan processing.

In a gold sale transaction of similar value, when done with a trusted partner, one can unlock the true value of your idle gold and the final payout can be up to 30% higher, with no take responsibility for a high interest rate.

The value of risk on gold loans is always higher because one is constantly afraid of losing the collateral and facing a negative impact on one’s credit rating. Thus, it takes credible and trustworthy sellers to get the full value of the gold they choose to sell, as well as knowledge and confidence around selling gold.



The opinions expressed above are those of the author.