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All that glitters is not always gold - Outside View by Chirag Mehta

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All that glitters is not always gold
May 3, 2011

Consider this; you go to your jeweller to sell some old jewellery and are pretty sure that the ornament will fetch you a decent price. But, your jeweller offers you a price that has a huge discount factored in, giving you even lesser than the price you had paid much earlier while purchasing the jewellery. Shocked, you ask "Why?..." and are told that your old jewellery is not all gold, it lacks in purity.

- - - - - - - - -

While this may have (fortunately) not happened to you, low purity standards of gold jewellery in India is very much a fact. This has been proved by the often disappointing results of the surveys conducted by the Bureau of Indian Standards (BIS) surveys for gold purity checks. For the benefit of retail customers, the media regularly publishes reports on maintaining caution while purchasing physical gold.

However, recently, the fear of "purity concerns" has also extended to Gold Exchange Traded Funds (ETFs). Customer apprehension is understandable, and we have received queries voicing concerns regarding the purity of the gold backing Gold ETFs:

  • "... If we are not sure of the purity of gold in our hands, how can we be sure of the purity of gold that backs ETF units?..."

  • "... We see Demat units which assures us that these units are backed by gold instead of receiving physical gold. But, how can we note the purity of gold in ETFs? ..."
These are very valid questions to raise, considering the current inflationary conditions where an increasing number of people are looking towards gold as a store of value. At Quantum, we have tried to ensure that we address these concerns by sharing with you (many times in the past) the process that we actually follow for purchasing the gold that backs the Quantum Gold ETF. For the sake of a brief synopsis, allow me to reiterate that:
  • We purchase gold of only 0.995 finesse or above, and sourced only from London Bullion Market Association accredited refiners

  • We import the gold through banking / authorized channels

  • We ensure that during the process of importing, the gold does not leave the custody of accredited vaulters

  • We ensure that the gold is accompanied by all the necessary statutory documents such as Customs invoice, Bill of Entry, Master Airway Bill, Purity Certificate etc., - establishing authenticity of gold.
Now, even after a detailed explanation of the purchase process, and the fool-proof method of investing in Gold, it's possible that you are still hesitant to believe in the purity of gold and the convenience of ETFs. Again, understandable!

And ofcourse we couldn't leave the discussion without giving you an answer that you trust in. So, here's what we did: to leave no scope for doubt that the gold held by Quantum Gold ETF on behalf of its investors is pure, we put all the gold bars that we hold under a "purity test". A first of its kind initiative by any Gold ETF in India! Even our vaulting agent who has been in the business of safekeeping and transporting precious metals since years was amazed to see this exercise being done for the first time.

This wasn't as easy a task as it sounds though. To begin with, we had to search for a service provider who would understand our requirements, and as we were the first Gold ETF to want to pursue such a task, the search was quite exhaustive. We found a good support in Quantum Equipment Company Pvt Ltd, who carried out the purity tests at the vaults where the gold is stored. (We're sure you must be wondering about the connection between Quantum Asset Management Company Pvt Ltd and Quantum Equipment Company Pvt Ltd. However, please note that there is no relation between the two companies. We share the same name by sheer coincidence!)

The gold assaying a.k.a purity testing was done using the Karatmeter Mistral, a precious metals analyzer machine. This method uses microspot XRF technology to determine the percentage of precious metal present. It is a fast, precise and non destructive method for Karat determination. The technology and machine was designed by a firm in Germany known as Bruker AXS Microanalysis GmbH - a worldwide leader for such analyzing technology and systems.

You would be pleased to know, and we would be glad to announce that all the gold held in Quantum Gold ETF has been tested and certified to be of 99.50 purity (0.995 fineness) and above. Here is the Assaying Certificate for your reference.

And in conclusion, just to let you know, we performed this test to assure you that what you own through the Quantum Gold ETF, is real and pure gold! Here, all that glitters is truly gold!

Chirag Mehta is Fund Manager, Commodities for Quantum Mutual Fund and manages the Quantum Gold Fund ETF and the Quantum Gold Savings Fund among others.

Disclaimer:

The views expressed in this Article are the personal views of the author Chirag Mehta and not views of Quantum Asset Management Company Private Limited(AMC), Quantum Trustee Company Private Limited (Trustee) and Quantum Mutual Fund (Fund). The AMC, Trustee and the Fund may or may not have the same view and DO not endorse this view.

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