Saving in gold to hold value, bars and coins, never jewellery
A man bought gold jewellery "as savings", needed the money a year later, sold it, and lost a large part of the price even though gold hadn't fallen. What he lost was the making charge: the craftsman's fee paid at purchase that nobody refunds at sale. This lesson gets you buying the gold that's actually meant for saving, and knowing you paid the right price.
What you'll have at the end
You'll know which piece to buy, at what weight and purity, from where, when, and how to work out its zakat.
Step one: separate wearing gold from saving gold
Jewellery, chains, bangles, rings, is wearing gold. Its making charge is 15 percent or more, paid and never returned. It's bought to be worn, and if sold one day it loses the whole making charge. Saving gold comes in two kinds only: the bar, usually 24 carat, and the coin, 21 carat at 8 grams in the Egyptian and Gulf souks. Their making charges are small, and some certified dealers refund part of it on resale. An ounce is 31.1 grams of 24 carat, if you come across the term.
Step two: pick a weight the making charge doesn't eat
Bars start at one gram, which suits a beginner, but the making charge on a single gram is high as a share of its price. From 5 grams up the share drops sharply. The rule: collect cash until you reach the price of at least 5 grams, then buy, instead of buying a gram every month and paying the charge over and over. The coin is a good middle ground for anyone who wants a piece everyone recognises and every dealer buys.
Step three: buy somewhere that gives you paper
A certified dealer or a known jeweller, and an official invoice stating weight, purity, price per gram and the making charge separately. Without an invoice you don't know what you paid, and whoever buys from you doesn't know what they're buying. A piece carrying a dealer's stamp and serial sells anywhere at the day's price.
Step four: don't buy on the day of panic
The common behaviour is for everyone to rush for gold when its price jumps, out of fear of another jump, and buy at the top. The useful behaviour is the opposite: buy in quiet periods and on dips, regularly, and leave the jump days to others. In Egypt there's a simple indicator: when the gap between the souk's dollar rate and the official one is a few piastres, the local price is calm and it's a fair time to buy.
Gold is a tool of years, not weeks. Anyone buying to hold value for five years doesn't care that the price dipped 5 percent the month after they bought.
Step five: keep it and work out its zakat
A safe place at home, or a safe, with the bar's original case. Then zakat: if the saving gold you hold reaches 85 grams of 24 carat or the equivalent, and a year has passed, you pay 2.5 percent of its value on the counting day. Use the same counting day you chose in lesson 1.2, and count gold and cash on one sheet. As long as the zakat goes out, this isn't the hoarding the warning is about.
Buy the piece with your own hands from the dealer and take it home. Online gold funds that sell you a "share" in gold you never see carry doubts and complications a household holding value has no need of.
Where most people trip
On emotional buying: a pretty piece "for the daughter when she grows up" counted as savings when it's jewellery. Or buying from the neighbourhood jeweller without an invoice because he's "known". The first loses the making charge; the second doesn't even know what it bought.
Tonight's exercise
Write down the gold you hold and sort it: wearing or saving. Add up the saving gold in 24-carat grams or equivalent. If it reaches 85, work out the zakat now. Then write the amount you'll collect monthly until you reach the price of the first 5 grams.
Questions I get asked
My wife wants jewellery, not bars.
Jewellery is hers, to wear and enjoy, and it's a legitimate adornment expense. Saving gold is a separate piece in the safe, and the two are never mixed in the sum.
21 or 24 carat?
For bars, 24, because it's the standard the world prices by. The coin is 21, well known and easy to sell. Both hold value; choose whichever you find with the lowest making charge where you live.
Should I sell gold when it rises a lot, to profit?
If you bought it to hold value, no, because you'd need to buy more at the same high price. Selling is for need, or to turn it into an asset that earns, which is the next module's subject.
Log your gold purchases in Fawatery under their own category, so on counting day the figure is ready, along with the price per gram you paid each time
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Based on: "How do I invest my money: dollars, property or gold?" and "The traditional road to wealth, wealth books summary".
Gold is a third of the answer. The next lesson is about the second third, the cash you keep: in which currency, how much of it stays liquid, and why.