How to buy Gold Jewellery this season!

October 11, 2006 by Manav | मानव.

A recent survey by BIS found out that most of the jewellers in India don’t adhere to the hallmark selling gold jewellery. They found out that most of these jewellers who advertise 22 carat actually fall short by considerable percentage. I personally found that something that was advertised as 23 carat in actual turned out to be 20 carat!!! I recently did some excercise and I’m sharing my thoughts/math with you.

Basics:

• 22 Carat Gold translates into 91.6% or 916KDM as popularly known as. ( 22/24 * 100 = 91.6%)
• 24 Carat Gold does not translate into 100% but into 99.9% or 999 as popularly known.
• Cost Computation – Assuming rate of 24 Carat Gold is 8700
  o   Rate of 22 Carat Gold should be 7975 == (22/24) * 8700
  o   Similarly 18 Carat Gold should be 7118 = (18/24) * 8700
   

Criteria I use:

• Pay for Gold based on the current market rate – you can find MCX rate in popular channels like CNBC TV18, NDTV Profit etc.
• I never pay for Hyderabad rate or Chennai rate or Vijaywada rate as popularly called by various jewelers
• Never pay for wastage – why?
• Pay for making charges – this will vary based on jeweler to jeweler, type of design etc.
• I don’t mind paying higher charges for the designs I like.
   

Jewelers where I shop in Hyderabad (they sell what they advertise i.e. 22 Carat gold == 22 Carat Gold)

• Tanishq – Making charges are high
• TBZ – Making charges are high but they’ve great designs
• Alukas – Best rates (one can tally with rates from TV) – making charges are reasonable and they’ve great designs.
   

Avoid

• Mussadilal – Punja Gutta
• Shankar Lal – Rd 10 Banjara Hills
   

Tricks jewelers use – assuming we’re buying 22 Carat Jewelry

• Assume
  o   24 Carat == 8700, therefore
  o   22 Carat == 7975
  o   20 Carat ==  7250
• Wastage  
  o   10% translate into Rs 797.5
• Making Charges
  o   Nil
• This should translate into
  o   7975 + 797.5 == 8772.5 ß This is what we pay
• In reality they sell you 20 Carat gold and this translate into
  o   7250 + 797.5  == 8047.5 ß This is their cost. Assuming 10% wastage covers their actual wastage + making + overheads + margin
  o   Therefore you paid Rs 725 extra == (8772.5 – 8047.5)
• In other words
  o   8772.5 == 7250 + (797.5 + 725) == 7250 + 1522.5
  o   OR Cost of 20 Carat Gold + 21% of 20 Carat Gold
  o   Or 21% over cost of Gold
   

Assume you go to a genuine seller who charges reasonable making charges

• Assume
  o   Rs 100 per gram of making charges or Rs 1000 per 10 gram
• This translate into
  o   7975 + 1000 == 8975
  o   OR 12.5% over cost of Gold

You can now see how these jewellers are benefiting. A simple math can revel it all. I hope this helps all of us being a smart buyer.

Manav |  मानव गौड़

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