Buying Gold This Tihar? Jewellery Isn't the Same as Investing in Gold

 

In most Nepali families, gold isn't really a financial decision. It's a wedding gift, a mother's security, something you buy on Dhanteras because it's auspicious. I'm not going to tell you to stop doing that.

But I hear the same sentence every year: "Gold is the safest investment." Sometimes it's true and sometimes it isn't, and the difference mostly comes down to one thing. Are you buying gold, or are you buying jewellery?

 

Where the price comes from

The daily gold and silver price you see quoted in Nepal is set by the Federation of Nepal Gold and Silver Dealers' Association (FENEGOSIDA). It follows the international gold price, the rupee's exchange rate and import duties, which is why it can move a lot even when nothing has changed in Nepal.

The price is quoted per tola (about 11.66 grams). You'll see two grades:

• Fine gold (chhapawal): the purest grade, usually sold as bars, biscuits or coins.
• Tejabi gold: slightly lower purity, quoted a little cheaper, and what a lot of jewellery is made from.

When you buy jewellery, you pay for more than the gold in it. That's where the investment story starts to fall apart.

What you actually pay for jewellery

A jewellery bill usually has three parts:

1. The gold, at the day's rate for its purity and weight.
2. Making charges (jyala), for the craftsmanship.
3. Wastage (jarti), for gold lost during making, added as extra weight or a percentage.

Plus any tax on the bill. Making charges and wastage vary a lot by shop and design. Intricate pieces cost more.

Here's an illustrative example. To keep the maths simple, I'm assuming gold is Rs 2,00,000 per tola. That's a round number for this example, not today's rate.

• A 2-tola necklace: Rs 4,00,000 of gold
• Making charges and wastage of 15%: Rs 60,000
• You pay: Rs 4,60,000

Now say you need the money and sell it the next week. A dealer generally pays for the gold content only, often at a rate a little below the day's selling price, and nothing for the making charges. Say you get 97% of the gold value: about Rs 3,88,000.

You've lost around Rs 72,000 on a "safe investment," and the gold price didn't even move. In this example, the price would need to rise by nearly 19% before you'd break even.

If you want gold as an investment

If the goal is to hold some of your savings in gold, not to wear it, a few things help:

• Buy fine gold (bars or coins), not jewellery. You avoid most of the making charges and wastage.
• Buy from established dealers and keep the bill. It records the weight and purity and makes reselling easier. Check the stamp or hallmark.
• Ask how they buy back before you buy. What rate, what deductions, and whether they'll buy back from someone who didn't buy from them.
• Think about storage. A locker costs a yearly fee. Keeping gold at home carries theft risk. Both are part of the real cost.

What gold does and doesn't do

Gold has a real place for many people. It's easy to understand, it's accepted everywhere in Nepal, and it has often held its value when the rupee has weakened or other assets have fallen.

It also has real limits:

• It pays nothing while you hold it. No interest like a fixed deposit, no dividends like shares. Your return is only whatever the price does.
• The price can fall, and stay down for years. "Gold always goes up" is something people remember after a good decade, not a rule.
• Selling is lumpy. You can't easily sell a quarter of a necklace when you need Rs 30,000.

So I think of gold the way I think about anything else in a portfolio: one part, not the whole thing. If most of your family's savings sit in jewellery, that's the gold version of the problem in my diversification post.

Watch out for gold "schemes"

Around festivals you'll see offers like "pay monthly for 11 months, we add the 12th" or "deposit cash, get gold at today's price later." Some come from reputable shops, many don't. Before joining anything like this, ask who is holding your money, what happens if the shop closes, and whether you can see the terms in writing.

If someone promises fixed, guaranteed returns from "gold trading," treat it as a red flag. More on that in my post on investment scams in Nepal.

My Tihar approach

• If it's a gift or a tradition: buy it, enjoy it, and pay for it from your festival fund, not a loan. Just don't count it as an investment.
• If it's meant as savings: buy fine gold, keep the bill, and keep it to a modest share of what you save.
• Either way: check the day's rate before you walk into the shop, and ask for making charges and wastage to be shown separately on the bill.

Shubha Tihar.

General information, not personal financial advice. Figures are illustrative and rounded, not current gold prices. Rates, charges and taxes change, so check the day's rate and the dealer's terms before you buy. Have a question? Leave it in the comments.