KFJ Jewellery – Bond of Gold scheme

KFJ released a full page ad today in leading newspapers. They announced Gold buyers can buy gold at the price of Rs.1799/gram and First 1000 buyers can buy it at Rs.1699/gram. This Plan is closing on Akshaya Tritiya May 13,2013.

Spot price for Gold today is Rs.2426/gram. Obviously the price advertised is at very deep discount. What is the catch ?

Ad image 1 :

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Ad image 2 : Table and highlights of the scheme magnified

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Today’s Gold price as per Indiagoldrate.com : Rs.2426 (22K price). Please note for jewellery only 22K gold price is used.

deposit_table

This is not a monthly payment plan. You have to make the payment upfront and after the holding period of 60 months, you can get the gold. There is no mention of wastage charges or making charges. Usually jewelers make significant profit under these two items.

Indian buyers wont invest money in equity market, calling it very risky. But they are ready to queue up to invest in such low yielding deposit schemes, because of the word – Gold.

Remember KFJ has no credit rating and not a publicly traded entity, so gold buyer investing for 5 years are taking lot of risk. They don’t know the assets and liabilities of the company. Can we trust this jewellery shops to hold our money for 5 years ? What a clever way to mislead buyers to believe they are getting gold at a very cheap price ?

Mutual funds, stock markets are regulated by SEBI. Banks and Non banking finance companies are regulated by RBI. Who regulates entities like this ? Why Government of India is not stopping jewellery companies to collect monies in such schemes ?

Some complaints by buyers who joined such schemes. Please note, KFJ is just taken as an example here. There are several gold jewelers all over India, collecting money in the name of gold deposits and they ALL work in the same way.

A gold buyer is better of buying gold using paper form and convert it to buy jewellery at the time of need. Gold coins, Gold bars, Gold ETF, Gold Mutual Fund, e-Gold – which is best ?

What you must do at this time when Gold is crashing ? Read Gold Sucks!

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