Sunday, December 2, 2007

Understanding the price of 22K gold,wastage and making charges.

Note: If you are looking for gold rate please look in the right column under the heading Today's Gold Price.

Ok, back to the post.The question on 22k price, wastage and making charges often gets asked in jewelry forums and in "answers" forum across various portals. So here's our take:

An Example:Assuming the price of 24K gold is Rs.10,000/10 grams.(ah ! those were the days)

You will find the price for 22K gold = Rs.9,700( printed in newspapers as Abhushan jewellery).

Since the actual quantity of gold is 22 parts of the 24 parts. Actually the gold price should have been Rs. 10,000 X 22/24 = Rs. 9166.

So, how does one explain the difference. Lets see what happens at jewellers' end.

Wastage Charges:Once a jeweller commissions a Karigar(Craftsman) to manufacture a jewellery item. The karigar wastes some gold in manufacturing it. Yeah what you just read is true. The gold gets 'wasted' in the manufacture of a jewellery item. It depends on the jewellery item. For the pure gold items the wastage is around 6-8%, whereas for a diamond jewellery it goes upto 15%-25% of pure gold.

Now, ofcourse at a technical level it doesn't get wasted and the karigar meticulously collects it. But for all practical purposes the jeweller fraternity files that under wastage and passes that to the customer, albeit in a hidden manner.

Also remember that the karigar mixes alloys to gold to make it 22k pure. These alloys also adds up to the cost and is filed under wastage charges.

Hence, the price difference of actual 22K gold versus the 'Abhushan Jewellery' rate that you see in Newspapers.

Making Charges:Making charges are what a consumer pays above the price of gold(on a certain day) for crafting the gold into jewellery. This varies from item(viz. bangles) to item(viz. chains) and from one jeweller to another.

How we are bought and sold:

Dr.Robert Levine the author of 'The Power of Persuasion - How we're bought and sold' mentions in the chapter 'Learning to avoid stupid mental arithmetic' about a critical insight into the consumer psychology.

Consolidate the Losses and separate the Gains

He found that if a salesman clubbed the losses in a certain transaction and gave you a whole figure for the losses, while he separated the gains, A consumer would be more comfortable conducting the transaction than if it were the other way around.

Now look at it this way. For a 22K jewellery item you pay ( The price of 22K gold + Wastage Charges + Making Charges) . There are 2 losses, that of making charges and the wastage charges. So, by combining the wastage charges with the price of gold, a consumer now sees just
the making charges.

And my jeweller fraternity has taken heed to this very advice.


sonal said...
This comment has been removed by a blog administrator.
Ruchika Gupta said...

Hi Sonal,

Thanks for your comments. Yes you have pointed out to a relevant customer pain. We will soon post on understanding diamond/ gemstone prices.
So stay clued to this blog and keep coming back for more.

Axiom said...

Tanishq Jayanager, Bangalore charges 21% for WASTAGE on top of the standard GOLD RATE...!
We should reconsider before buying from here...!
Bangalore,, India