Gold jewellery vs coin: the making charge you pay upfront

A premium you pay before the price moves

Gold jewellery is bought to wear as much as to hold, and that is a fair reason to buy it. But it comes with a cost that a coin or bar does not carry: the making charge. This post works out how large that cost is and how far the gold price has to move before you are back to square one. It deals only in arithmetic. Nothing here says where gold will go.

The assumptions

• Gold at ₹10,000 a gram. A round number for easy sums; it is not the current price.
• 10 grams of gold, so ₹1,00,000 of metal.
• GST at 3% on the total invoice value. Jewellers sometimes bill making charges as a separate line with its own GST treatment, so look at your invoice; a different split moves the numbers only slightly.
• A coin or bar with a 2% premium over the metal value. That is an assumption; real premiums vary by seller.

What ₹1 lakh of gold really costs

The last column is the premium you pay over what the gold in the piece is worth on the day you buy it. It is the amount the market has to make up before the piece is worth what you paid.

How long to break even

Assume, only for the sake of the example, that the gold price rises 8% a year. The time to cover the premium is the number of years n for which 1.08ⁿ equals the premium factor:

This assumes you could sell the jewellery at the full metal value, which is generous. Buyback is often priced below that, so the real break-even is later. At a flat gold price the cost is never recovered: you would sell ₹1 lakh of metal that cost you ₹1.15 lakh.

If gold does not rise 8% a year, every number in the second column stretches. If it rises faster, they shorten. The table's purpose is the ranking and the order of magnitude, not a forecast.

What the table does and does not say

It does say that the making charge dominates the cost. On a coin, the premium plus GST is about 5%. On a piece with 18% making, it is over 21%. The metal is the same.

It does not say jewellery is a bad purchase. If you will wear it, the use is the point. The sums apply to the part of the purchase you think of as an asset. A useful way to look at a ₹1.15 lakh piece with 12% making charge is as ₹1 lakh of gold plus ₹15,360 of crafting, GST and a jeweller's margin, paid for the pleasure of the design.

It does not cover purity. Hallmarked gold of a stated purity matters more than the making charge in one respect: you are paying for the gold content, so confirm it on the invoice.

Other ways to hold gold

If the aim is gold exposure rather than ornament, the same ₹1 lakh can be held as a coin, a gold ETF or a sovereign gold bond, each with a different cost structure. The sovereign gold bond vs gold ETF vs physical gold guide lays out the costs and tax of each, and the SGB vs gold ETF calculator lets you run your own numbers.

A checklist before buying

1. Ask for the making charge in rupees per gram and as a percentage, and whether it changes with weight.
2. Ask for the buyback policy in writing: price basis, deduction, and whether making charges are returned.
3. Check how GST is split on the invoice.
4. Compare the all-in price per gram of gold content across shops, rather than the making percentage alone; a low percentage on a high gold rate can cost the same.
5. Decide which part of the purchase is for use and which is for value.

All figures use assumed prices and premiums for illustration, and do not predict the gold price. They are not shop quotes. Making charges, GST treatment and buyback terms vary; confirm them with the jeweller.