Gold Rate in Chennai

India is considered as a consumer and not a producer of gold. This implies that the country doesn’t mine gold. India relies heavily on imports to meet existing gold demand. Gold prices are derived from London’s over-the-counter market. Gold rates are set daily twice a day at 10:30 AM and 3 PM in London Bullion Market Association (LBMA).

IBA (ICE Benchmark Administration) publishes the LBMA gold prices in US dollars which serves as a benchmark for gold producers, consumers, investors and central banks worldwide. On the basis of this, the prices of gold are valued and traded throughout the world. In India, Indian Bullion Jewellers Association, banks and many private companies, etc. play an important role in fixing the Chennai bullion rate.

Previously excise duty was levied at 1% and VAT at 1.5% on the yellow metal but now  after the implementation of Good and Services Tax, the consumer is required to pay 3% GST on the value of the gold jewellery including making charges. This move was welcomed by the big market players like Tanishq and PC Jewellers as the cost gap between the organized and unorganized gold market will come down. Apart from 3% GST for gold in chennai, taxes on processing charges and customs duty remain unchanged at 5% and 10%, respectively.

Know more about GST on gold

Trading in gold is carried out worldwide. This is why gold rates in India are influenced by a number of different economic, social, and political factors. These factors are discussed below:

1. Global crises: Gold usually does well during geopolitical crises such as trade wars or armed conflict. It is because gold is viewed as a source of safety amid such crises. This pushes up the demand for gold which sometimes affects gold prices.
2. Interest rates: Interest rates have a huge impact on the prices of gold because when RBI hikes interest rates, people start to park their funds in bank deposits and government bonds. This affects the demand for gold which causes the price to dip as well.
3. Inflation: During inflation, the value of our currency tends to go down. During that time, people tend to hold “money” in the form of gold. Gold is considered a tool to hedge against inflation and currency devaluation. This could increase the demand for gold which drives up gold rates in chennai.
4. Demand-supply angle: Global demand for gold is 1000 tonnes more than its supply. With less mining capacity coming through, most of the gold is being recycled. This factor also affects the gold prices to fluctuate in chennai.
5. US dollar-Rupee equation: Increase in the US dollar has a direct correlation with gold rates in Chennai. However, the change in the exchange rates doesn’t impact global gold prices.

Gold prices usually vary from city to city in India due to the two main reasons given below:

• Cost of safeguarding and hauling cost of gold is expensive and further adds up to the gold rates in chennai
• Prices of gold also differ due to different jewellery associations in India. These associations are responsible for regulating the gold prices on a daily basis.

The consumer won’t get the gold at the same price across the nation due to the difference in transportation cost and different jewellery associations. Bullion or jewellery associations in India are responsible for regulating the gold prices on a daily basis, which is done twice in a day. Today gold rates are calculated by taking international gold prices at that particular time plus incurred cost which leads to the variation of prices in different cities.

Through the given formula, consumers can calculate the final price of their gold jewellery:

Final Price of the Jewellery: Price of the gold(22/18/14 karat)* Weight(in grams)+ Making Charges+GST at 3% on the price of (Jewellery Making charges)

Many financial experts believe that gold should be a part of every investor’s investment portfolio as it acts as a hedge against various market uncertainties. Also, it has been observed that the value of this commodity in the long run always appreciates. Following are some of the ways to invest in gold:

Gold Coins: Gold coins are distributed through recognized MMTC outlets, bank branches and post offices and comes with a buy-back facility.

Gold ETF: It is popularly known as paper gold and is traded just like stocks. It is similar to buying an equivalent sum of physical gold but you get it in the form of paper or is visible in your portfolio online. To get started with the gold ETFs, the investor needs a trading account with a stock broker and a demat account. However, if one invests via paisabazaar portal, one doesn’t need a demat account to get started. One can either invest in lump sum or even invest through SIP.

Sovereign Gold Bonds: Issued by the RBI, they are listed on the National Stock Exchange and Bombay Stock Exchange. The tenure of the bonds is 8 years with the exit option available after the 5th year. Through gold bonds, the investor can earn assured return. They are not available round the year but are notified from time to time.

Digital Gold: One can also start with digital gold where one can get started as low as Rs.1. Many online platforms such as PayTm, Freecharge offer investment into digital gold. Digital gold offered by MMTC-PAMP is 99.9 percent pure whereas SafeGold offers 99.5 percent purity.

Gold Saving Schemes: Many jewellery houses have also started offering gold saving schemes which allows buyers to save systematically for the chosen tenure. For e.g, the buyer needs to deposit a fixed amount every month for 11 months and jeweller on the other hand will add a month’s installment at the end of the tenure as a bonus. After the end of the term, you can buy gold from the same jeweller at a value which is equivalent to the total money deposited, including the cash incentive.

Before buying gold coins/ jewellery for investment, one should know the following aspects given below:

• Indian gold coins and bars will be of 24 KT purity and 999 fineness. These coins carry advanced anti-counterfeit features and tamper proof packaging.
• All coins and bars will be hallmarked as per the BIS standards.

Purity of the gold metal has always been a concern for consumers. This is why one should always check for the BIS hallmark sign when buying gold.  Bureau of Indian Standards (BIS), a governing body certifies the purity of gold jewellery/ coins/bars through hallmarking. This helps to maintain the standard of purity and ensures the jewellery you are buying conforms to the national and international standard of fineness and purity. As per the website of BIS, below are the components one should look at the time of buying gold jewellery:

• BIS Mark
  • 24K= 99.9% Pure
  • 23K=95.8% Pure
  • 22K=91.6% Pure (Also called as BIS 916 gold)
  • 18K=75%
• Purity in Karat
• Hallmarking Identification number/mark

Gold as an asset class has a negative correlation with other assets and usually helps to protect wealth in times of geopolitical tension, economic slowdown, increased volatility in financial markets. In 2019, gold generated 24% return in Indian rupee terms, outperforming  the returns clocked by the equity market. The price of 10 gram of gold ended at Rs.39.076 as on December 31, 2019. Listed below are some of the catalysts which predicts the gold rates to be up in 2020:

• Whenever the global economy faces a crisis, gold prices always benefit as more and more people look to park their funds in safe haven.  The post Brexit economic uncertainties will continue for a while which is pushing up the prices of gold in India.
• As per World Gold Council data, gold ETFs are witnessing positive participation where the holdings grew 14% in 2019
• Worldwide, many banks have lowered their interest rates. Due to this, many are looking to park their funds in safe-haven assets such as gold. This will push the demand for gold in coming months which will affect its prices as well
• Rising tensions between the US and Iran, Coronovirus, US-China trade war and its impact on the jewellery industry  may lead to volatility in gold prices in 2020.
• Factors such as geopolitical uncertainty, economic woes and rupee volatility will push the prices of yellow metal.

Moreover, global economic slowdown, liquidity crisis in India and depreciation of the rupee against the dollar will support the gold market and will drive gold demand in 2020. As an investor, it is suggested to allocate a small portion of your entire investment portfolio (between 5% to 10% and not more) to gold either through gold savings funds or gold exchange traded funds.

Many banks such as ICICI bank, Axis bank, HDFC, etc. offer loans against gold/jewellery. One can easily get a loan against gold by bringing the gold article to such a bank. In the case of ICICI bank, the customer can get a gold loan from Rs.10,000 to 15 lakh. In return, the customer needs to pay the interest on that amount. However, the customer should know the following aspects of gold loan:

• Amount of loan that will be sanctioned depends upon various factors such as purity of gold, bar/jewellery/ tenure of loan, etc.
• Gold deposited by the customer is kept safely in a vault. On repayment of loan, it is returned to the customer in the same state as it was received.In case it is not repaid, the bank has the authority to either sell it to recover the amount.
• There are a couple of reasons why anyone would choose a gold loan. Firstly, the amount is disbursed immediately as the collateral is present in the form of gold articles. Secondly, the interest rates are somewhat lower than personal loans.