Is Gold Jewelry a Good Funding? Find out how wastage, making prices & GST silently eat as much as 30% of your cash — plus smarter methods to spend money on gold.
Gold holds a particular place in each Indian family — whether or not it’s for a marriage, a competition, or just an funding for robust occasions. We Indians love shopping for gold, particularly as jewelry. However have you ever ever questioned how a lot of your hard-earned cash goes waste once you purchase a gold chain, ring, or bangle?
Most individuals suppose, “Gold is gold — it should at all times maintain worth!” However the actuality is kind of totally different. While you purchase gold jewelry, you don’t simply pay for the gold. You additionally pay for wastage, making prices, and taxes — all of which quietly eat away at your funding.
On this put up, I’ll clarify, in easy phrases, how a lot you really lose when shopping for gold ornaments — with actual examples, calculations, and tricks to save your self from pointless losses.
Is Gold Jewelry a Good Funding? Beware 30% Hidden Loss!
What Determines the Value of Gold Jewelry?
While you stroll into a jewelry store and ask for a gold chain, you pay extra than simply the gold’s market value. Your ultimate invoice consists of:
Gold Worth: Based mostly on present market price for pure gold (24K).
Purity: Jewelry is normally 22K or decrease, not pure 24K.
Wastage: Further gold misplaced in making the decoration, so that you pay for it too.
Making Prices: Labour price to design, lower, polish, and end the piece.
GST: 3% tax on the whole quantity.
How Purity Impacts Your Gold’s Worth
Pure gold is 24 Karat (99.9% pure). However ornaments are hardly ever made in 24K as a result of pure gold is just too gentle.
Most Indian jewelry is 22K (91.6% pure) or 18K (75% pure). So, once you purchase 10 grams of 22K gold, it solely incorporates 9.16 grams of pure gold. This already means a small portion of your cash goes in direction of different metals combined to make the gold sturdy.
The Hidden Value of Wastage
Jewellers usually point out a “wastage cost”. Why? Once they soften, lower, or polish gold, tiny quantities are misplaced. Historically, they cost 5% to 10% as wastage, although trendy know-how makes actual wastage minimal.
For easy, machine-made jewelry, wastage could be 3%–5%. For handcrafted, delicate designs, it might go as much as 15%.
This wastage is added to your invoice — you pay for gold that you simply don’t even get to maintain!
Making Prices: The Labour Charge You By no means Get Again
Making prices can differ extensively:
- Machine-made chains or bangles: 8%–12% of gold worth.
- Intricate handmade jewelry: 15%–25%.
This price is non-refundable. If you happen to ever promote the decoration, no jeweller can pay you for making prices.
Shopping for Worth vs Promoting Worth Distinction — The Hidden Shock
Many gold consumers assume that after they promote again their gold jewelry to a jeweller, they are going to get the identical prevailing gold price per gram. Sadly, that’s removed from actuality.
Jewellers normally purchase again outdated jewelry at a discounted price in comparison with the day’s market value. For instance:
- They could deduct 2% to five% from the prevailing gold price as their margin.
- Some jewellers may additionally cut back the speed additional if the decoration is broken, stones are lacking, or it’s an outdated design.
- On high of this, the making prices and wastage prices you paid whereas shopping for are by no means refunded — they’re gone perpetually.
Instance –
Suppose the market value of 22K gold right now is Rs.1,000 per gram.
- While you purchase, you pay Rs.1,000/g + making prices + wastage + GST.
- While you promote, the jeweller could purchase it again at solely Rs.950–Rs.980 per gram, relying on purity, deductions, and coverage.
So, not solely do you lose on making and wastage, however you additionally lose on the decrease buyback price — including one other 2–5% hit to your pocket.
GST: The Tax You Neglect
While you purchase jewelry, 3% GST is charged on the entire — gold worth + wastage + making prices.
Once more, this tax shouldn’t be recoverable once you promote the gold later.
Actual Instance: How A lot You Really Lose
Let’s take a easy, sensible instance:
- Market value for pure gold (24K): Rs.1,000 per gram (hypothetical)
- You purchase a ten gram 22K gold chain
Your invoice:
| Element | Quantity |
| Gold worth (10g) | Rs.10,000 |
| Wastage 10% | Rs.1,000 |
| Making prices 10% | Rs.1,000 |
| Subtotal | Rs.12,000 |
| GST 3% | Rs.360 |
| Whole paid | Rs.12,360 |
So, you pay Rs.12,360 for an decoration with solely 9.16 grams of pure gold in it.
Now, Let’s See What Occurs When You Promote It Again!!
After just a few years, you resolve to promote your gold jewelry. For simplicity, let’s assume the market gold value stays the identical at Rs.1,000 per gram. (Sure, I do know costs don’t freeze — however this helps clarify the hidden loss).
- The jeweller checks the purity and internet weight: 9.16 grams
- Present market price: Rs.1,000 per gram
- However jeweller’s buyback price is normally 2% decrease ? so that they give you Rs.980 per gram
- Gross worth: 9.16g × Rs.980 = Rs.8,977
- Much less melting & assay prices (round 3%): Rs.270
- Ultimate quantity you really obtain: ~ Rs.8,707
What Did You Actually Lose?
- Quantity paid once you purchased: Rs.12,360
- Quantity you bought again: Rs.8,707
- Loss: Rs.3,653
- Share loss: ~30%
So, you lose practically 30% of your cash, even when gold costs don’t drop.
That is the place most consumers get shocked — you pay the full value + making prices + wastage + GST, however when promoting, you:
- Don’t get again any making or wastage prices
- Lose 2–5% on the buyback price
- Pay melting and purity test deductions
Web consequence: An enormous chunk of your so-called “funding” merely vanishes!
What annual development is required to interrupt even the LOSS?
We use CAGR (Compounded Annual Progress Charge):
Components:
Ultimate Quantity = Preliminary Quantity × (1 + r)^n
The place:
- Ultimate Quantity = Rs.10,000 (break even)
- Preliminary Resale Worth = Rs.7,000 (after prices)
- n = holding interval (years)
- r = annual development price
So,
10,000 = 7,000 × (1 + r)^n
(1 + r)^n = 10,000 / 7,000 = 1.4286
Required CAGR to interrupt even the loss
5 Years holding interval – ~7.36% per yr
10 years holding interval – ~3.63% per yr
15 years holding interval – ~2.36% per yr
20 years holding interval – ~1.79% per yr
So, in the event you maintain jewelry for:
- 5 years, gold should admire ~7.4% per yr simply to get your a refund.
- 10 years, you continue to want ~3.6% annual development to interrupt even.
- 15 years, about ~2.4% annual development wanted.
- 20 years, about ~1.8% annual development wanted.
However wait — does gold beat inflation?
India’s long-term inflation is 5–6% per yr. So, to really develop your wealth above inflation, gold should admire by:
- Inflation (5–6%) + break-even CAGR
So for a 5-year holding, gold should develop at about 7.4% + 6% = 13–14% per yr simply to beat inflation and get better wastage losses.
For 10 years, it should develop at about 3.6% + 6% = 9–10% per yr to truly ship actual returns.
What does historical past say?
Over the long run (20–30 years), gold in India has averaged 8–10% annual return, however:
- This consists of durations of big spikes (disaster years)
- For lengthy stretches, gold barely strikes in value (early 90s, early 2000s)
- Jewelry at all times loses to pure funding gold due to the wastage/making
(Be aware – Refer my articles on Gold the place I’ve proved with round 45 years of information that even after holding for the long run, there is no such thing as a assure that it’s going to even beat inflation.)
Cash vs Ornaments — Which is Higher?
What about gold cash or bars? They’re barely higher:
- Cash are normally 24K.
- Wastage is minimal (1%–2%).
- Making prices are decrease (1%–3%).
- You continue to pay GST.
So, the resale loss for cash is round 5%–10%, a lot decrease than for ornaments.
However you could promote them again to the identical jeweller to get a greater price. In any other case, new jewellers will deduct assay and melting prices once more.
Finest Methods to Put money into Gold With out Wastage
In case your purpose is funding — not jewelry for carrying — there are higher choices than shopping for bodily gold:
Sovereign Gold Bonds (SGBs)
Issued by the RBI, these bonds are linked to gold’s market value. Despite the fact that new points are usually not out there, you should purchase the outdated points by the secondary market.
- You get the gold value at maturity.
- Earn 2.5% annual curiosity (additional return).
- No GST, making, or wastage.
- Maturity proceeds are tax-free.
Good for long-term buyers.
Gold ETFs (Alternate Traded Funds)
These are digital items linked to gold costs.
- You maintain gold in Demat kind.
- You pay a small expense ratio (~0.5%).
- No bodily storage worries.
Gold Mutual Funds
- They spend money on Gold ETFs.
- No headache of getting a Demat Account.
- Promoting and shopping for are simple immediately with Mutual Fund Corporations.
- Bit costly by way of price in the event you evaluate it with the Gold ETF. However hassle-free funding.
Tricks to Scale back Loss When Shopping for Gold Jewelry
All the time purchase BIS-hallmarked jewelry (licensed purity).
Select easy designs with low wastage.
Negotiate making prices — larger outlets usually cut back them for good clients.
Maintain the invoice protected — wanted for resale.
Promote to the identical jeweller who offered you the piece.
Key Takeaway
Shopping for gold jewelry is a cultural pleasure — however by no means deal with it as an funding. If you happen to purchase a gold chain right now for Rs.1,00,000, perceive that about Rs.25,000–Rs.30,000 won’t ever come again. You pay for design, wastage, and taxes — all of which haven’t any resale worth.
So, subsequent time you step into a jewelry store, think twice: Would you like jewelry for carrying or gold for investing?
For carrying, ornaments are tremendous, however for investing, Sovereign Gold Bonds, Gold ETFs, or gold mutual funds are smarter choices that protect your cash’s worth higher.
Gold will at all times shine in our tradition, however your cash shouldn’t get wasted for no motive. Perceive how jewellers value your ornaments, test the purity, negotiate making prices, and know your choices.
As I discussed above, in case your motive for buying gold jewelry is as a commodity, then purchase bodily gold jewelry. However shopping for gold jewelry as an funding to your future requirement is a lack of cash and a threat of safekeeping.
