Difference Types of Gold

Gold holds significant cultural, economic, and financial importance in India, symbolising wealth, prosperity, and security. As one of the world's largest consumers and importers of gold, India's robust jewellery market and widespread affinity for gold investments underscore its economic significance. Gold loans leverage this intrinsic value by allowing individuals to use their gold assets as collateral for loans, providing quick liquidity without needing to sell gold holdings. This financial tool offers flexibility with competitive interest rates, catering to diverse borrowing needs from personal expenses to business expansions. Thus, alongside its cultural and economic roles, gold loans exemplify how gold continues to shape India's financial landscape.

What are the different types of gold?

Gold, a precious metal, is available in various types, each with unique characteristics. Here are some of them:

1. 24 karat gold: The purest form of gold, it is 99.9% pure. It’s the most expensive and has a bright yellow colour.
2. 18 karat gold: Comprising 75% gold and 25% other metals, it’s stronger and more durable than 24K gold.
3. 14 karat gold: Popular in the US, it contains 58.3% gold and 41.7% other metals.
4. 10 karat gold: The lowest gold alloy, it’s strong but contains only 41.7% gold.
5. Gold alloys: These include Yellow, White, Rose, Green, Purple, Blue, and Black Gold. They are created by mixing gold with other metals, giving them unique colours.
6. Gold plating, vermeil, rolled, and filled gold: These types involve coating a base metal with a layer of gold.

Each type of gold has its own value, strength, and colour, making it suitable for different uses. The type of gold used in jewellery significantly impacts its value and durability.

Different colours of gold

Gold, a precious metal, can be alloyed with other metals to create a variety of colours. Here are some of the most common ones:

1. Yellow gold: The purest colour, it’s made by mixing gold with silver, copper, and zinc. It’s the most hypoallergenic and requires the least maintenance.
2. White gold: A modern and sleek option, it’s made of gold and platinum or palladium. It’s more durable and scratch-resistant than yellow gold.
3. Rose gold: A romantic and warm colour, it’s alloyed with gold, copper, and silver. Due to its copper content, rose gold is more durable than yellow or white gold.
4. Green gold: A soft and natural colour, it’s mixed with gold, silver, and sometimes copper. Silver gives the gold alloy the green nuance.
5. Grey gold: A neutral and subtle colour, it’s a unique blend of gold and other metals.
6. Purple gold: A brittle and exotic colour, it’s a rare type of gold.
7. Blue gold: A cool and dark colour, it’s another unique type of gold.
8. Black gold: A bold and mysterious colour, it’s created through various methods, including alloying and surface treatments.

The colour of gold is not just limited to the traditional yellow. By alloying gold with various metals, we can achieve a spectrum of colours like white, rose, green, grey, purple, blue, and even black. Each colour has its unique composition and characteristics, offering a wide range of options for jewellery and other decorative items. This diversity in gold colours allows for personalisation and expression through this precious metal.

Yellow gold

When most people hear the term "gold," they naturally think of yellow gold. The most common kind of gold used in jewellery worldwide, according to the World Gold Council, is yellow gold.

Because of the variations in the ratios of the various metals in the alloy, yellow gold truly has a variety of colours. Darker or more reddish yellow gold may indicate a higher copper content in an alloy, whereas lighter or somewhat greener alloys indicate a higher pure silver content.

In addition, nickel and zinc are occasionally utilised in yellow gold jewellery. These white metals combine with copper to make alloys that produce warm, brassy tones that mitigate the glaring yellowness of pure gold.

White gold

White gold is the most common colour for engagement rings, even though yellow is the most popular gold colour overall. A 2021 study found that 45% of US couples choose an engagement ring made of white gold.

An alloy of white metals, yellow gold, and occasionally copper is called white gold. The metal alloy looks more white the less gold and copper it contains. Jewellery made of white gold is typically plated with rhodium to make it even more white.

Palladium white gold, which is an alloy composed of palladium, gold, and occasionally silver, is the most common alloy used to create white gold. Less common than gold is the hypoallergenic precious metal palladium.

Rose gold

Rose gold gained notoriety in the late 1800s when famous jeweller Carl Fabergé introduced it to the Russian Imperial court. Rose gold is one of the most widely used gold colours available today, despite being one of the more recent varieties.

The ingredients of rose gold include silver, copper, and gold. Rose gold gets its rosy hue from copper. Either 18k or 14k rose gold alloys predominate.

Because 18k rose gold has more gold than the other, it appears paler and blush-pink but is also more shiny. Because 14k rose gold has more copper in it, the complexion is darker but less radiant.

Pink gold

Pink Gold, also known as Rose Gold, is a beautiful and unique type of gold. It’s created by alloying gold with copper and silver. The copper gives it a reddish tint, while the silver lightens the overall colour, resulting in a warm pink hue. This type of gold is stronger and more scratch-resistant than pure gold due to its alloy composition. The typical ratio for Pink Gold is 75% gold, 20% copper, and 5% silver. Its unique colour and durability make it a popular choice for jewellery, offering a romantic and modern alternative to traditional yellow gold.

Red gold

Red Gold, also known as Rose Gold, is a unique type of gold that gets its distinctive colour from a high proportion of copper mixed with gold. The more copper in the alloy, the more intense the reddish colour. Red Gold is darker than Rose Gold and has a rust-red colour, very similar to copper. This type of gold is not only beautiful but also durable due to the strength of copper. Its unique colour and durability make Red Gold a popular choice for jewellery, offering a bold and vibrant alternative to traditional yellow gold.

Black gold

Black Gold is a unique form of gold that has been treated to achieve a black surface colour. Though it is not a natural metal, it is achieved through several methods, including alloying gold with another metal like cobalt, electroplating with black rhodium or ruthenium, or using a powerful femto-second laser to alter the surface structure of the metal. The result is a striking, pitch-black metal that offers a bold and edgy alternative to traditional gold. Despite its unconventional colour, Black Gold is made from real gold and retains its intrinsic value. It’s becoming increasingly popular in the jewellery industry for its distinctive and eye-catching appearance.

Purple gold

Purple gold is an aluminium and gold intermetallic alloy. In contrast to conventional jewellery alloys, intermetallic are easily damaged, fragile, and challenging to deal with.

Due to these factors, relatively few jewellers create jewellery with purple gold. Those that do, however, only use it as ornamental pieces because purple gold isn't sufficiently pliable to be used as functional jewellery pieces like necklace chains and ring bands.

Green gold

Green Gold, also known as Electrum, is a naturally occurring alloy of gold and silver. It’s not truly green but has a greenish-yellow tint that can be very subtle. The presence of silver gives it this unique colour but doesn’t add to its strength. To make it more durable, Green Gold is often alloyed with other metals like zinc or nickel. Despite its name, it takes a keen eye to identify Green Gold due to the subtlety of its colour. This unique type of gold is used in various applications, including jewellery and coinage, offering a natural and soft alternative to traditional yellow gold.

Blue gold

Blue Gold is a unique type of gold that gets its distinctive colour from the addition of either gallium or indium. The gold-indium alloy contains about 46% gold (approximately 11 karat) and 54% indium, forming an intermetallic compound AuIn2. This compound is quite fragile. There’s also a gold-gallium variant, AuGa2, which has a lighter blue hue and contains 58% of 14K gold. This variant is more solid than AuIn2. Despite its unconventional colour, Blue Gold is made from real gold and retains its intrinsic value. It offers a cool and dark alternative to traditional gold colours.

Different types of gold coatings

Gold coatings, or plating, involve applying a thin layer of gold onto a base metal. Here are some types:

1. Gold plated: This involves electroplating a very light layer of gold (0.05% of actual gold or less) on top of a base metal like copper, brass, nickel, or aluminium.
2. Gold vermeil: This is heavy gold plating over sterling silver. The layer needs to be at least 2.5 microns thick, and the minimum gold purity used should be 10 karats.
3. Hard gold plated: This is a variant where a substantial layer of gold is deposited onto a substrate.
4. Soft gold plate, duplex gold plated, vacuum gold plated, chemical plated, and immersion gold plated: These are other types of gold plating with varying characteristics and uses.

Gold-filled

Gold-filled, often referred to as rolled gold, is a material made by heat and pressure-bonding a thin layer of gold to a brass core. The exterior gold layer must account for at least 5% of the item’s total weight. Gold-filled items are highly resistant to tarnish and the gold layer can last for many years, even with daily wear. It’s an affordable alternative to solid gold, offering the same luxurious look and feel. Gold-filled jewellery is a popular choice for its durability, affordability, and resemblance to pure gold. It’s a great option for those with metal sensitivities.

Rolled gold

Rolled gold, also known as gold-filled, is a type of gold that is created by bonding a thin layer of gold to a base metal, typically brass, through heat and pressure. The gold content must constitute at least 5% of the item’s total weight. Rolled gold is more durable and resistant to tarnish compared to gold plating. It can retain its shine and colour for years, even with regular use. While it’s not as valuable as pure gold, it offers a similar aesthetic appeal at a more affordable price. It’s a popular choice for jewellery due to its quality and cost-effectiveness.

Vermeil

Vermeil, pronounced as 'ver-may', is a type of gold plating over sterling silver⁴. The gold used in vermeil is at least 10 karats and the layer is 2.5 microns thick. This makes vermeil more durable and long-lasting than regular gold-plated jewellery. It's an excellent choice for those who want the look of gold without the high cost of solid gold. However, over time, the silver underneath may start to show through¹. Vermeil jewellery is a popular choice for its affordability, quality, and resemblance to pure gold. It's a great option for those with a tight budget but still want a touch of luxury.

Gold plated

Gold Plated refers to a process where a thin layer of gold is applied to the surface of a base metal, often copper, brass, or silver. This is done using chemicals to deposit the gold layer. The thickness of the gold layer can vary, but it's usually quite thin, measured in microns. Gold plated items have the look and feel of gold without the high price associated with solid gold products. However, the gold layer can wear off over time, especially with frequent use or exposure to harsh chemicals. Therefore, gold-plated items may eventually need to be replated to maintain their appearance.

Types of gold and their impact on gold loans

Gold loans are a popular form of secured loan in India, where gold jewellery, ornaments, or coins are used as collateral. The type of gold and its purity can significantly impact the terms of a gold loan. There are several types of gold that can be used for these loans. Gold jewellery is the most common form used as collateral.

The loan amount depends on the purity and current market value of the gold. Gold for farmers is a specialised type of gold loan catering to the financial needs of farmers. These loans often feature lower interest rates and repayment schedules aligned with crop cycles. A gold overdraft facility provides ongoing access to funds using gold as collateral.

Factors affecting gold loan amount based on gold type

The amount of a gold loan is influenced by several factors, primarily the type and quality of gold. The purity of gold, measured in karats, is a significant determinant. Gold items of 22 karats or higher are usually valued higher, leading to a larger loan amount.

The weight of the gold also plays a crucial role. Lenders typically offer loans up to a certain percentage of the gold’s value, often up to 75% as per Reserve Bank of India guidelines.

The current market price of gold is another critical factor. As gold prices rise, the loan amount you can secure against your gold also increases.

The Loan-to-Value (LTV) ratio, which is the percentage of the gold’s value that lenders are willing to lend as a loan, also affects the loan amount.

Lastly, the presence of decorative items, diamonds, or precious stones in your gold jewellery can affect the overall value, as these are generally not considered in the rate per gram.

Conclusion

Gold loans generally have lower interest rates than other types of loans since gold serves as collateral. However, the interest rate may vary depending on the gold rate. When the gold rate is high, the interest rates are lower as the higher value of the collateral diminishes the risk. Understanding the types of gold and their impact on gold loans can help borrowers make informed decisions and choose the loan that best fits their unique situation and requirements.

The gold loan interest rates typically have lower interest rates compared to other types of loans, ranging between 8.75% p.a. to 26% p.a. The exact rate depends on various factors, including the lender’s policies and the prevailing market conditions.