Gold, Guest Blog, Knowledge

How is the Price of Gold Calculated?

Since time immemorial, gold has always fascinated human beings. The fascination for the yellow metal is both due to emotional reasons and rational reasons. On the emotional front, gold is believed to make us look more presentable and well-off. And, on the sensible front, it is one of the best investment options that have stood the test of time. Gold has always proved to be a man’s best friend in times of distress and need.

When a person wants to sell his gold holding, it is crucial to evaluate their gold. The evaluation of gold depends upon several factors. However, before selling the gold, it’s essential to know how to calculate the gold price. A gold price calculator is a convenient tool for anyone to calculate the gold price per gram. So, if you are looking to know more about a gold price calculator in India, then read on.

Why is a Gold Calculator Necessary?

Each city has its separate jewelers association. These associations decide the live gold prices, which get declared every morning. That’s why the gold prices are subject to change every day and from city to city and state to state. There are no standard making charges for jewelry across India. Similarly, there are no defined rules for pricing and billing gold jewelry. This variation in price across the nation leads to several innocent customers getting cheated of their hard-earned money. This is why customers must know about the gold price calculator, which can calculate the value of their jewelry or other gold assets.

Why Does Gold Price Fluctuate Daily?

The gold prices constantly fluctuate and rise and fall daily. The various reasons why gold prices cannot be the same for an extended period are listed below:

Demand and Supply Dynamics

As with any other product category, gold prices are also subject to dynamics of demand and supply. The only difference is that in the case of gold, the gold mines produce a fixed amount of gold. Hence, the gold supply is more or less static. However, during festivals, wedding seasons, and some special days, the demand for gold goes up. This hikes the gold prices.

Market Conditions

Another reason for variation in gold prices is market speculation. The market is always agog with speculations regarding the policy of government and RBI. The investors keep speculating about various possibilities and act accordingly. 

Factors Necessary for Calculating Gold Rates

Calculating gold prices is not an easy task. That is because various factors matter while calculating the price of gold. The list below gives an idea of the multiple factors that are involved in estimating its value. These factors are essential aspects of the gold price calculator.

Purity of Gold

There are two ways of measuring the purity of gold. The first is Karatage (expressed at KT), and the other is Fineness Number. While 24KT gold is considered the purest form of gold, it is not used for making gold. 24KT gold is too soft. Hence, some metals, like Silver or Zinc, are added to give it the desired strength. Typically, 22KT gold is used for making jewelry.

BIS Mark

The Bureau of Indian Standards (BIS) is the sole agency in India approved by the government to test and certify the purity and quality of gold. The gold jewelry is verified in one of the verified laboratories. The jewelry that meets the BIS quality specifications is allowed to bear the BIS logo. This hallmarking guarantees the purity of the gold and affects the price of the gold.

Jeweller’s Identification Mark

The jewelers who have been in the business for a long time make a brand of their own. These jewelers put their identification mark along with the BIS mark. The BIS website has a list of certified jewelers. Ornaments designed by these jewelers fetch a better price compared to non-certified jewelers.

Gold Price Calculator

If you want to know the value of your gold holdings, the following formula works as a gold price per gram calculator:

Final Jewellery Price = Price of (24KT/22KT/18 KT) gold per gram X (weight of gold in grams) + Jeweller’s Making charges + GST at 3% on (Jewellery Price + making charges)

Let’s understand this with an example:

Suppose, you buy a gold chain of weight 11 grams, which is 22 KT pure. The price prevailing that day is Rs. 43,000 for 10 grams. The jeweler charges 10% making charges. In such a case, the final price of the gold chain will be calculated using the above formula as 

  • Price of 10 grams of 22KT Gold = Rs. 43,000
  • Price of 1 gram of 22KT Gold = Rs. 43,000/10 = Rs. 4,300
  • Price of 11 grams of 22KT Gold Chain = Rs. 4,300 * 11 = Rs. 47,300
  • Making charges = 10% of Rs. 47,300 = Rs. 4,730
  • Total value of gold chain (before tax) = Rs. 47,300 + Rs. 4,730 = Rs. 52,030
  • GST @ 3% on total price = 3% of Rs. 52,030 = Rs. 1,560
  • Finally the total price (with tax) = Rs. 52,030 + Rs. 1,560 = Rs. 53,590

How are Gold Prices Decided?

Many people have this question in mind: who authorizes monitoring/ control and sets gold’s price? And, are there any government bodies” for this? Are these bodies domestic & international? Is there any way to learn how to calculate the gold price? This blog attempts to answer all these questions.

When it comes to fixing international prices, there is no clear answer. However, according to recent research, the gold prices are derived from London Over-The-Counter (OTC) spot gold market trading and COMEX gold futures trading. Many people think that the physical gold market regulates gold rates. Still, the reality is that the paper gold market regulates international gold prices.

All other markets, including the Shanghai Gold Exchange (SGE), Multi Commodity Exchange (MCX), and even physical gold markets globally, follow the prices decided by the paper gold markets in London and New York.

In India, gold prices are determined through an informal process. The Indian Bullion Jewellers Association (IBJA), a group of India’s biggest gold dealers, plays a crucial role in deciding daily gold rates. These members spread in all corners of India account for almost all legal gold sold and purchased in India.

Market Factors that Determine the Movement of Gold Prices

In addition to the agencies mentioned above, certain market factors determine the movement of gold prices in India. Some of these factors are listed below:

Inflation: When inflation is more, customers tend to buy more gold to hedge them against inflation. As a result, when inflation is high, the price of gold goes up and vice versa.

Gold reserves of the government: The RBI maintains the balance between currency and gold reserves. When the RBI starts holding gold reserves, the cash flow in the market increases while the supply of gold decreases. As a result, the price of gold goes up. 

The global movement of gold prices: India is the largest exporter of gold. Hence, whenever there is any price fluctuation because of any global happening, it affects the gold prices in India.

Interest rates on related products: In any country, the current gold prices are an indicator of interest rate trends. When the interest rates are high, people tend to sell their gold and convert it into cash. This increased supply reduces the price of gold. And when the interest rates are low, people start investing in gold. This increased demand increases the costs.

Change in market demand: There is a massive demand for gold jewelry during India’s wedding and festive season. That increases the gold prices during these times.

Conclusion

The love for gold among Indians is a well-established fact globally. Indians love to wear gold, invest in gold, and hence buy gold. There is also a lot of selling and re-purchasing of gold that happens. And the calculation of gold price is not easy. While there is a formula, but there are various factors that play a role. And then, there is also the psychological factor that primarily people sell gold during distress or need. At that time, they are not in the best position to bargain. Hence, it makes tremendous sense to get an idea about how gold evaluation is done.

Before mortgaging or selling gold, customers must know the current valuation of their gold. This can be done easily by having knowledge of having a gold price per gram calculator. The gold price calculator explains how to calculate the gold price simply so that you get the best value for your assets. If you are looking to buy or sell gold, always make it a point to visit trusted people in the organized sector. You get assurance of genuine quality and the best price for your holding. 

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