Imagine you bought a beautiful gold necklace five years ago for a family wedding. You remember the rate of gold being significantly lower back then. Today, as you look at the news and see the gold price in India touching new highs, you decide it is the perfect time to liquidate that piece for some urgent business capital or a home renovation.
But, when you go and raid the jewellery store, the price that they give you is so low that it is impossible that the "spot price" that you saw on your mobile screen one hour ago. You are struck with confusion, maybe even frustration. Are the jeweller’s actions unfair?
This is a common experience for many Indian households. Understanding the gap between the "market rate" and the "in-hand value" is essential for making sound financial decisions. As a veteran in the financial advisory space for over two decades, I have seen many individuals lose out on value simply because they didn’t understand how the gold price is restructured during a resale.
The Anatomy of the Gold Price Gap
When you see a gold price in India advertised on news channels or financial websites, you are usually looking at the "Spot Price" or the "IBJA (Indian Bullion and Jewellers Association) Rate." This is the price for 24-karat (99.9% pure) raw gold bullion. When you sell used jewellery, you aren't selling raw bullion; you are selling a finished product. Here is why the numbers don't match up.
1. The Purity "Karat" Factor
Most jewellery is made of 22K or 18K gold because 24K is too soft for intricate designs. If your piece is 22K, it only contains 91.6% pure gold. Naturally, a buyer will only pay for the actual gold content, not the alloys mixed in to make it durable.
2. Deduction of "Making Charges" and GST
When you bought the jewellery, you paid for the craftsmanship, known as making charges, which can range from 8% to 25% of the gold value. You also paid 3% GST on the total.
Important Note: Making charges and GST are "consumption costs." They add value to the beauty of the piece, but they carry zero resale value. A buyer is only interested in the raw gold content, not the labour that went into it years ago.
3. Melting and "Wastage" Charges
To recycle your gold, a buyer must melt it down and refine it. During this process, a small percentage of metal is inevitably lost (oxidation or removal of impurities). Most buyers deduct a wastage charge (typically 2% to 5%) to cover this loss and the cost of refining.
Comparison: Buying vs. Selling 10 Grams of 22K Gold
To make this clearer, let’s look at a hypothetical scenario based on a market gold price of ₹75, 000 for 10 grams of 24K gold.
|
Factor
|
Buying New Jewellery
|
Selling Used Jewellery
|
|
Base Gold Rate (22K)
|
₹68, 700 (91.6% of 24K)
|
₹68, 700
|
|
Making Charges (12%)
|
+ ₹8, 244
|
Excluded
|
|
GST (3%)
|
+ ₹2, 308
|
Excluded
|
|
Wastage/Melt Loss (3%)
|
Included in making
|
- ₹2, 061
|
|
Net Price
|
₹79, 252
|
₹66, 639
|
As you can see, there is a significant "spread" between what you pay and what you get back.
Should You Sell or Pledge? The Liquidity Dilemma
Should you be in a situation where you require money very quickly, selling your gold can seem like the fastest way out. But you have to question whether this is a lasting need or just a passing one.
When you sell, you lose the asset forever. If the gold price in India continues to rise, as it historically has, you miss out on that future appreciation. This is where a gold loan becomes a strategic alternative. When you opt for a loan, you still own your gold. You are basically "leasing" cash from your property.
A practical choice for many is Muthoot Finance, which has been ranked as India’s No. 1 Most Trusted Financial Services Brand for eight consecutive years by the TRA Brand Trust Report 2024. With a legacy built over an 800-year family business history, they offer a way to unlock liquidity without permanently parting with your family assets.
Recommendations for Maximum Value
In case selling is the only option, here are some of the things you can do to avoid being undervalued:
- Check the Hallmarking: The BIS (Bureau of Indian Standards) hallmark is proof of purity. A buyer may deduct a higher "melting loss" if the gold is not hallmarked.
- Clean the Jewellery: Dirt and oils can add weight. Make sure the item is clean before it goes on the scale.
- Insist on an Electronic Purity Test: Try to avoid the old "touchstone" method. Modern X-Ray Fluorescence (XRF) machines give an accurate purity reading without damaging the metal.
- Compare the Buy-Back Policy: Check if the original jeweller has a buy-back policy. Often, they offer their own pieces at a slightly better rate.
Making the Right Choice for Your Future
The decision to part with gold is often emotional and financially heavy. Whether you are looking to reinvest or settle a debt, transparency is your best friend. Always remember that the rate of gold you see on the news is a starting point, not the final destination.
If your need for cash is temporary, a loan ensures your assets stay safe. For instance, Muthoot Finance serves over 2.5 lakh customers daily and protects assets with a world-class 7-layer security system, including 24/7 monitoring and high-tech strong rooms. This ensures your gold stays secure while it continues to appreciate in value.