A gold-financing scheme might seem an attractive option, especially when jewellers offer huge discounts. Take a closer look. These schemes are offering standard discount rates that can be achieved through any other financial investment. Buyers are instead better off buying gold ETFs immediately from the market instead.

There are various gold investment options being promoted by jewellers and investment companies. Satyug Gold, a new gold retail chain, is offering gold coins and bars at discounts but with a lock-in period for delivery. You will get a discount of 15 per cent with a lock-in of two years, 24 per cent for three years, 30 per cent for four years and 37 per cent for five years.

If you “buy” 10g (for Rs 29,055, the price on April 15) and allow for delivery after five years, you pay only Rs 18,588 plus one per cent value-added tax, which works out to Rs 18,773. You will receive a card and an invoice stating you have booked the gold. The card has your photo and details of purchase (how much bought, rate at which bought, discount, purity of gold, etc). The scheme is being promoted by the India Bullion and Jewellers Association.

Experts, however, are cautious about such schemes. Kunal Kohli, gold analyst with Emkay Financial Services, says the scheme is similar to a futures contract and is a good option for investors because over a five-year period, gold prices will move up. “Gold is a commodity which will do well irrespective of how other assets are performing. But investors must consider it only if a jewellery association will give a guarantee that the delivery will happen, not otherwise. While investing, investors must ask for a stamp to this effect,” he says.

Another gold purchase scheme on offer is waiver of one instalment plan. For example, against payment of 10 instalments, the jeweller will pay the final 11th instalment. So, if you pay Rs 5,000 for 10 months, you can buy gold worth Rs 55,000 after 11 months.

But all these schemes are using the time value of money. For example, if you are investing regularly in a monthly investment scheme that provides returns at about 18 per cent per annum, at the end of 11 months, the value of your investment of Rs 5,000 per month will amount to Rs 55,000.

For a five-year scheme that gives you a discount, consider a fixed deposit with a bank instead. For example, if you invest Rs 18,700 in a bank fixed deposit today, after five years you will get about Rs 28,000-29,000, at 9-9.5 per cent interest which is what banks are currently offering. This is more or less equivalent to the value of gold that you will be purchasing. In other words, jewellers are offering you a financing scheme at regular rates.

According to Hitesh Jain, commodity analyst, India Infoline Ltd, the company is perhaps banking on the fact that in the short term, gold prices will come down. “On a conservative basis, prices could come down to Rs 24,000-23,000 in about two months. So, by taking the money upfront, the company probably wants to beat the likely correction in prices,” he explains. For investment in gold, ETF and gold savings plans are better options. Overall, investment in gold should not exceed 5-10 per cent of your total portfolio, say experts.