Things you should know before buying Gold Jewellery

I am not a fan of Gold and I consider wearing gold as a weird thing. I don't consider Gold more valuable than some other element like Iron in the periodic table, but we live in a country where gold traditionally plays a major role in every important event in your life. During my engagement, very reluctantly I bought a ring for me. I chose the smallest ring that one might have bought for engagement and my wife still complains about it :-). Again there may be numerous occasions where you have to buy gold for your sister, your nephew and so on even if you don't like.

Since I had been to jewellery shops a couple of times to buy gold now, I learned a few things about purchasing Gold.

Here are some of the points I learned:

What is Karat? Why do the jewellers mention 22 Karat ?

24 Karat is pure gold, but it is too soft and ornaments made out of it may not last longer. In India what we get from jewellery is usually 22 Karat Gold. That means it contains a certain percentage of other metals like Cadmium and Copper. 22 Karat means it contains (22/24) * 100 = 91.6 percentage Gold and remaining percentage contains other metals. That is why it is known as 916 Gold.

Suppose it is 21 Karat Gold, then it contains 21/24 *100 =87.5 percentage Gold. So to get more value, make sure that you are buying 22 Karat Gold.

What is BIS certification?

To ensure the purity of Gold and to prevent fraud, hallmarking Scheme was launched by Bureau of Indian Standards (BIS). The BIS certified jewellers can get their jewellery hallmarked from any of the BIS recognized assaying and hallmarking Center.
For example 916 hallmark from BIS ensures that it contains 91.6 percentage Gold or 22 Karat.
For more information see:

http://www.bis.org.in/cert/hallbiscert.htm

How do Jewellers Calculate Price of Gold ?
Jewellery price include the following:
1. Price of gold as per market rate for the day * number of grams of gold
2. Making charges
3. Wastage charges
4. VAT
Suppose you are buying jewellery worth 8gm gold and the market price for gold is 20000 for 8gms.
The price of jewellery= 20000+ making charges+ wastage charges+ VAT

What are Wastage Charges?

Jewellers claim that a certain percentage of Gold is lost when you make ornaments from Gold. I don't buy this argument since you are using machinery to make jewels these days and also even if there is a Goldsmith I heard that the Goldsmith can recover a substantial percentage of Gold wasted while manufacturing. Even if Gold is wasted, it may be minimal.

Unfortunately we have to pay for this wastage charge since there is no norm from government about it.The wastage charges vary from jewellery to jewellery and it is between 8 to 20 percent. It is where the jewellers make huge profit. If they are charging more than 10-12 percent you should negotiate to reduce the price. It may be possible to get it reduced by 2-3 percentages if you are making bulk purchases.

What are Making Charges?

Making charges are the cost involved in making jewellery from pure gold. It includes the price of additional metals and labor charges of the goldsmith. Most jewellers will club making charge and wastage charge together and name it as value addition charge. Some may charge it separately. Here also you can negotiate to reduce the price.

What is VAT ?

Value Added Tax(VAT) is a tax on the final consumption of goods or services and is ultimately borne by the consumer.It is usually charged at 1 percent for precious metals like Gold.

Some Important Points to Keep in Mind:

Jewellery is just another business- Don't go to a jewellery shop with the mindset that you are entering a temple. Ask the price of every item in detail like making charge and wastage charge. If you are a regular visitor or purchase in larger quantity negotiate on making charge and wastage charge. The better you negotiate the more benefit you will get. I had my own experience when my relative negotiated in a jewellery shop they said you are the first guy who negotiates in a jewellery shop like you are going to a vegetable market and they tried everything to make him feel ashamed. But he insisted and finally he succeeded to get a reduced price :-)

Buy gold only from reputed jewellers or jewellers you trust- All jewelers may not be selling 22 Karat Gold while charging you the price for 22 Karat Gold. Ensure that the 916 hallmark is present in each item you buy.

Check the market price and find out the making charges before you go to a jewellery shop - It is better to check that days market price before you go to a jewellery shop. It would be good if you can find out about the making charges also.