Is Gullak Gold+ Worth the Risk? High Returns and Hidden Dangers! A Detailed Review

Have you been scrolling through social media and noticed posts boasting about ‘up to 16% per annum gain’ with gold schemes?

The promise of such high returns can be very tempting. But who exactly is behind these claims, and what is the product they are offering?

Before you dive in, there are some hidden risks you need to understand.

Table of Contents:

• What is Gullak Gold+?
• The Alluring ‘16% Return’ Claim
• Is Gullak gold trustworthy? Can I trust the Gullak app? Is the Gold Plus app sage?
• What are the risks of gold leasing?
• What is the difference between SGB and Gullak gold +?
• Choosing the Right Gold for You
• The Takeaway
• Final Thoughts

What is Gullak Gold+?

Earlier this year, the fintech app Gullak launched an offering called ‘Gullak Gold+’. So, what is Gullak Gold+?

Gullak Gold+ is a gold leasing program facilitated by Gullak along with Augmont, a gold refinery. The idea is simple: users can lease their gold through the Gullak app. But what does leasing gold mean, and is it really beneficial for you?

Gullak Gold+ use a leasing program where your gold is leased to partnered jewelers. You earn a base return based on gold price appreciation (historically around 11%) and an additional 5% for the lease.

The Alluring ‘16% Return’ Claim

The bold claim of up to 16% return per annum is based on two components: an 11% ‘historical’ return and a 5% ‘lease gain’. This sounds impressive, but there’s more to it than meets the eye.

Gold, like any other asset class, experiences market fluctuations. It doesn’t consistently provide an 11% return each year.

The 16% return claim is more of a marketing ploy than a guaranteed outcome. It’s crucial to understand this before diving in.

Is Gullak gold trustworthy? Can I trust the Gullak app? Is the Gold Plus app sage?

Gullak states that the leased amount is secured by bank or corporate guarantees. Gullak claims the guarantee is equal to the maximum leasing quantity allowed to a jeweller.

A guarantee is typically exercised when the jeweller does not pay the lease, shuts shop, or fails to return the gold after the lease ends. However, a bank guarantee doesn’t ensure full and timely recovery of losses.

But what happens if the price of gold rises suddenly and the value of leased gold exceeds the guarantee amount?

In such cases, there’s a risk that jewellers could default on their repayments. Recovering your gold would depend on the guarantee or collateral, which might not cover the full value.

Also, enforcing a bank guarantee can take time, meaning you might not get your gold back when you need it. Imagine the stress and anxiety of watching gold prices soar while being unsure if your investment is safe.

Greed for high returns can easily turn into a nightmare of losses.

What are the risks of gold leasing?

i.) Counterparty Risk

This Gullak Gold+ leasing introduces a big risk: counterparty risk. If the jeweler defaults on the lease or goes bankrupt, you could lose your entire investment.

There’s no guarantee you’ll get your gold back, and Gullak’s “100% bank guarantee” only applies to the base gold value, not the promised returns.

ii.) Transparency Issues

Gullak doesn’t disclose their jeweler selection process. Are these reputable businesses with a good track record? Without transparency, it’s impossible to assess the true risk of default.

iii.) The Biggest Red Flag: Lack of Regulation

The most significant risk in Gullak Gold+, lies in the fact that both digital gold and gold metal leasing are not regulated in India. This means there’s no regulatory body to protect your interests if things go wrong.

There are no guarantees for your capital or returns. If you face any losses, you’re on your own. Are you willing to gamble your hard-earned money in an unregulated market? The dangers here cannot be overstated.

What Should You Do?

Given all these factors, it’s wise to steer clear of gold leasing products like Gullak Gold+. Gullak Gold+ might seem like a shortcut to gold riches, but the risks are substantial.

Instead, consider more secure investment options such as Gold ETFs (Exchange Traded Funds), Gold Funds and Sovereign Gold Bonds (SGBs).

These are regulated and offer a safer way to invest in gold without the high risk. Don’t let the allure of high returns cloud your judgment—stick to investments that prioritize security and regulation.

What is the difference between SGB and Gullak gold +?

Sovereign Gold Bonds (SGBs) vs. Gullak Gold:

Both SGBs and Gullak Gold offer ways to invest in gold, but they differ significantly in terms of risk and return.

SGBs: The Safe Haven

• Government Backing: SGBs are issued by the Government of India, offering a layer of security and stability. This minimizes the risk of default compared to Gullak Gold’s reliance on partnered jewellers.
• Guaranteed Returns: In addition to gold price appreciation, SGBs provide a fixed interest rate (currently 2.5%) paid semi-annually. This guaranteed return offers a buffer against market fluctuations.
• Tax Benefits: SGBs offer tax benefits on maturity if held for 8 years. Long-term capital gains tax applies on profit if sold before maturity, but with indexation, reducing the tax burden.

Gullak Gold: Higher Risk, Higher (Potential) Reward

• Potentially Higher Returns: Gullak Gold boasts returns of up to 16%, which can be significantly higher than SGBs. However, this return is not guaranteed and depends on the gold price appreciating and the jeweller fulfilling the lease agreement.
• Leasing Risk: Gullak Gold leases your gold to jewellers. If the jeweller defaults, you could lose your entire investment. SGBs eliminate this risk as the government backs them.
• Less Transparency: Gullak doesn’t disclose their jeweller selection process, making it difficult to assess the risk of default. SGBs offer complete transparency as they are government-issued.
• Regulation Uncertainty: Gold leasing through fintech platforms is a new area with evolving regulations. SGBs are a well-established investment with clear regulations.

Choosing the Right Gold for You

If you prioritize security and guaranteed returns, SGBs are the better option. They offer a safe way to invest in gold with some guaranteed return alongside potential price appreciation.

The Takeaway

• Gullak Gold+ offers an attractive return, but the risks are significant.
• Before you invest, weigh the potential rewards against the very real possibility of losing your money.
• Consider safer, well-regulated options for your gold investments.
• Remember, chasing high returns often comes with high risks.

Final Thoughts

While the idea of earning a high return from your gold might sound appealing, it’s essential to look beyond the attractive numbers and understand the risks involved.

Greed for high returns can lead to significant losses and regrets. Always prioritize security and regulation when it comes to your investments. Stick to safer, more reliable options to ensure your hard-earned money is protected.

Do you really want to take a gamble with your gold? Think twice before jumping into schemes that promise the moon but could leave you empty-handed. Your future self will thank you for making informed, wise decisions today.