It Glitters Yes, But It May Not Be Pure: Why Indians Need To Be Careful About The Gold They Buy

by M R Subramani - Jul 25, 2019 05:44 PM +05:30 IST
It Glitters Yes, But It May Not Be Pure: Why Indians Need To Be Careful About The Gold They Buy Gold has been one of the most boring assets to hold on to over the last four years. (Sam Panthaky/AFP/Getty Images)
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  • Planning to buy a 24-karat gold bar? Or have you bought one recently? Are you sure the bar is pure gold?

    There are fears that the gold bar that some customers buy from retailers, particularly those promising to sell cheap, could be of lower purity. Wondering why? Read on.

On Tuesday (23 July), the Indian Bullion and Jewellers Association (IBJA) sent a note to its members expressing concern over the sale of lower purity gold bars. It said that reports have been received in the last few months of the sale of such low-quality bars and the association has decided to crack the whip.

IBJA national president, Prithiviraj Kothari, said that the association will initiate action, including lodging a complaint with the police and informing relevant tax department officials, for each buyer and seller of such impure gold bars. Kothari said any member found violating the purity norms would lose their membership from the association and warned them against such trading.

The IBJA note isn’t surprising since there are murmurs in the gold sector over lower purity bars of the yellow metal being passed off as pure gold. Gold bars sent for testing to assayers like Emerald have confirmed that they are of lower purity.

For example, gold punched as a bar in Switzerland’s Valcambi should be 99.9 per cent pure. But test results from assayers showed that even these bars had a purity rating of 99.8 per cent or even lower.

According to the industry, gold in India is available at three levels of purity — 24, 22 and 18 karats. A 24-karat gold bar should have 999 fineness or 99.9 per cent purity since it is difficult to achieve 100 per cent purity. A 22-karat gold bar, used mainly for making jewellery, has 91.67 per cent purity. Metals such as silver, zinc and nickel make up the rest. And 18-karat gold, popular in places like Kerala, is made up of 75 per cent gold and 25 per cent of copper or silver.

In India, gold bars of 999 fineness are in demand from jewellers and investors. Getting gold bars is easy but currently import of the yellow metal attracts 12.5 per cent customs duty. With gold smuggling on the rise and scrap gold being recycled, gold bars are now being made locally too.

And this is where the problem crops up — with the local manufacturing of gold bars. Some unscrupulous refiners smelt scrap gold or smuggled gold and convert them into bars using counterfeit punching dies that make buyers believe that the bars have been manufactured in one of the reputed refineries abroad.

Such punching dies are available across the country and, if the bullion trade is to be believed, these are available in Mumbai, Rajkot, Surat, Kolkata and Visakhapatnam, besides some northern cities too. Punching dies of almost all leading global refiners besides that of India’s MMTC-PAMP are available for sale openly and they are being misused by some cunning elements.

In a way, even gold coins bought from retailers may not be as pure as the dealer or the retailer promises. There have been instances where the silver content is more or in excess of what is supposed to be in a gold coin.

Blaming a retailer or a dealer for such adulteration in gold may be unfair. This is because many retailers and jewellers are themselves unaware of such adulteration being done by the person/s from whom they buy the gold.

While a section of the gold sector blames the higher customs duty for such a fraud rearing its head, there is another view that this has got nothing to do with the import levy on the yellow metal. It is just that there are some people out there who want to make a fast buck and they would resort to any means to achieve their objective.

According to available data, gold smuggling quadrupled after the centre raised the customs duty on gold to 10 per cent in 2014. In the budget for the current financial year, Finance Minister Nirmala Sitharaman again raised the import duty on gold to 12.5 per cent.

The solution to end this perpetration of fraud would be for consumers/buyers to demand an assayers report, never mind the few extra bucks they would have to pay for it. An assayer’s report is a guarantee for the gold bar or coin that one buys.

Next, the bullion sector feels that there should be traceability for each bar that is sold in the market. This traceability should be available right from the time the gold is smelted out of its ore, made into a bar and further made into jewellery, right until it reaches a consumer. Also, refiners should have barcodes or unique numbers that would give all the details of a gold bar that is being bought by a consumer.

So, the next time you decide to buy a gold coin or a bar, ask your retailer or dealer for a guarantee for the metal’s purity. That will not just help you but also help to put a full stop to the activities of unscrupulous elements.

M.R. Subramani is Executive Editor, Swarajya. He tweets @mrsubramani

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