Gold jewellery holds significant financial and cultural value in India. Its prices have touched record highs. However, it is imperative to understand the breakup of making charges on gold jewellery. This will help you to take important decisions that will maximise your returns on gold resale.
India’s consumption of gold jewellery is expected to rise significantly. This will occur despite weaknesses in purchase volumes due to price growth. Gold is preceived as a hedge against inflation. Digital and lightweight gold are becoming extremely popular. This will drive the growth of India’s jewellery market in the coming years.
The market price and retail price of gold jewellery in India vary significantly. The retail price includes gold markup and manufacturing costs. Exchanging or selling gold involves major deductions.
Making charge is an irrecoverable loss for gold buyers. They typically account for 10%-25% of the original purchase. Jewellers also levy a market price deduction (roughly 5%) on making charges. This increases the overall cost of purchasing gold. Moreover, the government levies 3% GST on the original purchase price. This leads to a significant reduction in resale value.
Assume you paid ₹1,00,000 to acquire gold. After all these deductions, the final value of your gold would be ₹69,112.5. This tells us that customers typically recover only 75%-60% of their notional market value. Capital gains taxes also reduce the overall gains on gold jewellery.
This significantly reduces gains on gold resale. Moreover, old/less pure items of gold offer a lower market price.
With ₹69,112.5, it is advisable to invest in gold coins and bars as they provide a 100% buyback option. This also avoids losses associated with jewellery’s making charges.
Based on news reports, consumers in Tier II and Tier III cities are demanding trendy gold jewellery. Gold is increasingly being seen as a long-term investment asset. Short-term investors are capitalising on price fluctuations to maximise their gains. Long-term investors are building their portfolios to build personal wealth. Gold loans are also becoming extremely popular.
High gold prices have prompted Indians to reconsider the value of their gold reserves. Gold is seen as a liquidity tool. Small, new gold pieces are preferred more. Hence, gold is becoming expensive, not more heavy.
Selling gold involves heavy financial deductions in India. Understanding these calculations can help you make smarter decisions. It is better to buy gold coins and bars instead of gold jewellery to avoid these deductions. The rising preference for lighter and digital gold is expected to sustain the growth of the jewellery industry in the coming years.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Mar 20, 2025, 5:57 PM IST
We're Live on WhatsApp! Join our channel for market insights & updates
Get the link to download the App
