How the scheme works?
Gold saving Schemes are more like a recurring deposit in a bank, where you deposit an identical sum each month, on which you get an interest. In case of the gold saving scheme, you do not get interest, but the jeweller will pay the last installment.
Let's site an example. Most of the schemes are for for 12 months, wherein you pay money for 11 months and the gold jeweller will contribute an identical sum for the 12th month. Let's say you deposit Rs 3,000 for 11 months. The corpus works to Rs 33,000. The jeweller will now deposit another Rs 3000, which makes the corpus Rs 36,000.
One of the disadvantages of the scheme is that you are forced to buy jewellery after the completion of 12 months. In short, you cannot redeem the amount paid for cash. If gold prices are high you maybe induced to buy at higher rates.
For the jeweller it is a great advantage because he is forcing you to make purchases. Also, the returns are not stupendous and works out to around 8-10 per cent, which in any case you would get in a bank FD as well. Also remember that bank fixed deposits are much safer then these gold saving schemes.
Many individuals are compelled to rush into these schemes as they wish to buy gold for their daughters marriage or for an occasion. In such cases these schemes are ideal. However, if you wish to invest in gold through these gold saving schemes, then it is best to look at other options including gold ETFs. Read difference between gold and gold ETFS