Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

PRICING AND PROFITABILITY
Bank importers normally mark-up imported TT bars by around 0.1%. Secondary and lower tier bullion
dealers rely mainly on movements in the gold price for their profitability.
Gold jewellery is typically retailed at a declared price ranging between 5 - 25% above the prevailing gold price.
Retailers that sell gold jewellery with the correct caratage tend to have a gross profit (after fabrication costs) of less
than 10%.
Wholesalers generate a gross profit of 2 - 3%.
Most goldsmiths earn between Rs 4,000 – 15,000 (US$ 80 - 300 per month).
Small refiners can charge as little Rs 10 (US$ 0.20) per 10 g to refine small quantities of old gold jewellery.
Coin fabricators charge between Rs 20 – 60 (US$ 0.40 – 1.20) to make a 10 g coin.
Retailers usually sell a 10 g coin at a mark-up of less than Rs 50 (US$ 1.00).
PERSPECTIVE
This section can only provide indicative information. Pricing and profitability for each trade category can vary regionally,
within cities, and in the rural areas.
While there is some reference to the pricing of smaller businesses, the section focuses mainly on top end businesses for two
reasons. Within cities (and nationally), top end jewellery retailers are important as retail conduits. Although their standard
prices tend to be higher, the important point is that even these higher prices are extremely low by Western standards.
Tax elements
Reference to Customs duty, and State and municipal taxes, is usually omitted in this section for two reasons.
Standard bullion prices can sometimes incorporate these taxes.
State sales and other taxes, applicable to jewellery and other products, vary. For example, the State sales tax applied to
gold jewellery in the 4 main cities ranges from 1% in New Delhi to 4% in Chennai. The level of taxes can also change.
KEY FEATURES AT THE RETAIL LEVEL
Prices are “unfixed” at every level.
The prices of all gold products are generally unfixed, linked to the prevailing gold bullion price at the time of the
transaction.
Although some of the national retail jewellery chains, established since the mid-1990s, have started selling branded
jewellery at fixed prices, their combined volume accounts for less than 1% of the market.
Customers require a breakdown of charges.
Customers, at every level, normally require a detailed breakdown of all charges. For example, jewellery retailers are
expected to advise customers of the value of the carat gold content, the fabrication or “value addition” charge (including not
only the “labour” or “making” charge to fabricate the item, but also in many cases the “wastage” factor), the value of the
precious or semi-precious stones if the item is studded, and the relevant taxes.
Customers ask what price they will receive if they sell back or exchange the item.
Many retailers observe that this question is almost invariably asked at the time of purchase. For most customers, jewellery
is viewed as a tradable asset.
Customers bargain.
Buying, exchanging or selling jewellery, bars and coins invariably involves some bargaining between the customer and the
retailer, even though the discount tends to be small as the retailer’s gross margin above the prevailing gold price is
generally so low.
AN INTRODUCTION TO THE INDIAN GOLD MARKET 153