A recent report claiming 83 tons of Gold in China turning into Copper has spooked Indian gold markets. The fear is understandable, given India imports most of its annual gold requirement of 700-800 tons.
Surprisingly the entity at the center of this fraud shares a similar name as the place where the deadly coronavirus originated - Wuhan. For more info on Wuhan Kingold Jewellery Inc and the loss of $2.8 billion click here.
However, purity concerns, aren't new to Indian gold consumers or investors. As per the World Gold Council Retail Gold Insights survey 2019, 48% of potential investors and 28% of potential jewelry consumers cited lack of trust as a significant barrier to investing in or purchasing gold. That is indicative of apprehensions around fake or counterfeit bars and coins and product purity. And, these apprehensions haven't been without a reason.
The country's biggest refiner MMTC PAMP too has been quoted as "The scrap gold that the company gets for refining often contains 15-20% less gold than what 18 to 22-carat gold jewelry should have..."
In fact, as per data from Bureau of Indian Standards, 18%-20% of items picked from the market for random sampling have lower gold content than what is marked.
Such statistics are indeed distressing for gold investors in India. We all buy gold or jewelry as a means of securing our future or funding long term liabilities, such as daughter's marriage or medical expenses or son's education abroad. But we may not be sure of the purity of gold that we hold and how much value we may have to lose if it's impure. Such fact's can shatter our faith of buying Gold in physical form, which is always a safe haven.
When buying physical gold, purity is always a question. We all know of experiences we ourselves or someone known to us have had when one was caught with impure physical gold / jewelry and thereby settled for a lower resale value. One sure way to tackle this purity issue is to invest in gold is via ETFs.
As part of Quantum Gold ETF, investors are assured on the purity of gold backing your gold ETF units. All the gold owned by the fund on behalf of investors is stored in professional vaults.
The following is the process that we follow for purchasing the gold that backs the Quantum Gold ETF.
We purchase gold of only 995 finesse or above aka 24Karat, sourced only from London Bullion Market Association accredited refiners. LBMA is a global authority in precious metals and has a stringent criteria and process for certifying refiners. India has more than 23 refiners and only one refiner is LBMA certified.
Gold bars individually accompany a refiners certificate matching the serial number on the bar
We purchase gold that is imported through banking / authorized channels only
We keep tab of the trail of gold and ensure that after leaving the refiners door, it has not left sight of the accredited vaulters who have the liability to certify that for each gold bar
Gold at any time even for a fraction of second should not have left custody of the accredited vaulters. Once its gone out of the vaults, it cannot be accepted
We ensure that the gold is accompanied by all the necessary statutory documents that help verify gold's trail such as Customs invoice, Bill of Entry, Master Airway Bill, Purity Certificate etc., - establishing authenticity of gold
The gold is checked and verified twice a year by Statutory auditors and monthly by the custodian audits. In addition to that we ourselves go to the vault to check each and every gold bar held by the fund. And let me tell you that these vaults are highly secure and all the gold is safe. Let me share my experience. Firstly, only authorized personnel are allowed entry. Before visiting these vaults, I considered airport security checks tedious, now they seem like a breeze in comparison, because that's just the way visitors are scanned before entering the vault premises. Armed security and electronic monitoring only add to the ambience, which is guarded by multiple gates and metal detectors.
Once you have passed through the security checks, you are escorted to the lockers where the gold is stored in boxes, each box carrying 25 kgs of gold. Both the lockers and the boxes carrying the gold can be opened only one at a time. Every single bar is personally checked and counted, while verifying the refiner's check marks during our visits.
In addition to the highly secure places where your gold is stored, it is completely insured. The gold at all times is covered by a comprehensive insurance policy that even includes a terrorism cover. Ever tried insuring gold that you own or one in your lockers? I am sure that is next to impossible!
In addition to the robust purchasing process and monthly checks, in order to give investors more comfort and to be doubly sure of the gold that the fund holds on behalf of investors, Quantum AMC puts all the gold bars that we hold under a “purity test” every year. A first of its kind initiative by any Gold ETF in India! Even our vaulting agent who has been in safekeeping and transporting precious metals since years was amazed to see this exercise being done when we did it for the first time. And they are amazed how we diligently do it every year when no one else hasn't done it even once.
Every year, we would hire a professional agency who's an expert to conduct such purity tests. TCR Engineering Services Pvt. Ltd last conducted the audit. Founded in 1973, it is an ISO 17025 and NABL accredited independent Material Testing and Quality Assurance Laboratory serving 2500+ customers globally. They tested the gold bars held by Quantum Gold ETF using portable X-Ray Florescence analyzers which non-destructively and accurately measure the chemical composition of each and every gold bar held by the fund. We also disclose this Purity Certificate in our Annual Report every year.
You would be pleased to know, and we are glad to inform that all the gold held in Quantum Gold ETF has been tested and certified to be of 995 purity aka 24 Karat and above.
So, dear investor, we take pride in confirming that all gold owned by Quantum Gold ETF on your behalf is absolutely pure gold. Now that you are assured of the purity of gold you are investing in, you can confidently choose Quantum Gold ETF for your investments.
Chirag Mehta is a Sr Fund Manager for Alternative Investments at Quantum Mutual Fund. Image attributed to Associated Press
Disclaimer: Views expressed are personal and should not be construed as the official opinion of this publication. The article is for information purposes and readers are advised to research with a certified financial advisor prior to any investment.