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Gold for Indians is not just a commodity, but a part of our culture and heritage. India with over a billion people is the largest consumer of gold, even though most of its population live under poverty line. In this article, we have explained about Gold, purity, different color of gold-green gold, pink gold and about hallmarking of gold. why Indians buy gold?

Karat, Hallmark, Making Charges Important terms

The Gold content is measured in terms of karats (“k” or “kt”).

Carat and Karat are not to be confused. There is more to them then their slightly different spelling. Carat is associated with diamonds, is related to weight and is spelled with a C. Karat  is associated with gold, signifies percentage of Gold and is spelled with a K.

  • Pure Gold or 100% Gold is referred to as 24k Gold. When we say 24kt or 24k Gold jewelry, we mean that all the 24 parts in the gold are just pure gold without traces of any other metal(s) or 99.9 percent pure.
  • When this pure Gold is alloyed with other metals, such as silver, copper, or nickel, the Gold percentage decreases.  When we say 22kt or 22k Gold Jewelry we mean that 22 parts of the jewelry, is gold and the balance 2 parts are some other metal(s) or equal to 91.3 percent gold plus 8.6 percent of some other metal alloy.

A Hallmark indicates that the gold content in the jewellery has been evaluated and that you can take the gold quality as claimed by the jeweller to be genuine. A Hallmark – or Standard Mark – for gold jewellery is awarded by the Bureau of Indian Standards (BIS). BIS embosses the logo of hallmark along with fineness number (corresponding to given karat), hallmarking centre mark, jeweller’s identification mark, and the year of marking denoted by a code letter decided by BIS.

Why does Price of Gold Fluctuates?

Gold is traded (on the exchanges) everyday and demand, supply and various other factors determine the price each day. The national pure gold rates are usually published in most newspapers or websites. Gold rate also differs for different jewellers varies as it depends on from whom they are buying gold and at what price. The image below shows the returns of Gold and Nifty over years.

How Gold Price and Nifty have performed over the years

How Gold Price and Nifty have performed over the years

Price of Gold Jewellery

Price of gold ornaments depends on many factors. The formula or calculation used to arrive at price of gold ornament is given below:

Price of the gold ornament is  = ( Price of 22K gold * Weight in Grams) + (Wastage charges) + ( Making Charges)  ) + GST at 3% on (Price of jewellery + making charges) (Before 1 Jul 2017  was 1% VAT).

Purity of Gold: Jewellery made in low caratage [which means it has more of other metals] is cheaper than the traditional 22-carat pieces because of low usage of the precious metal. In above example we have considered 22K gold.

Making Charges are the charges you pay to the Gold Smith to make the Jewel out of raw gold. Different Jewellers charge differently for making gold jewellery.

Wastage Charges: During the process of making the ornament some amount of gold will be wasted or will be lost while cutting, soldering, melting etc.  Hence the gold gets ‘wasted’ in the manufacture of a jewellery item. These are called wastage charges and jewellery stores generally asks a buyer to pay these wastage charges. Generally, the wastage charges are dependent on type of ornament and they range anywhere between 3% to 25%. Wastage charges are expressed as % of the weight of gold ornament.

GST on Gold  With the introduction of GST at 3% for gold and 18 % for making charges, and keeping customs at 10%, the effective rate comes to 15.67 %. Before 1 Jul 2017, gold jewellers paid 1% excise and 1.2% value-added tax (VAT) over and above the 10% customs duty on bullion. This effectively worked out to 12.43 %. So, the effective price escalation on gold jewellery comes to 3.24 percentage points

Suppose the price of gold listed by the jeweller is Rs. 27,350 for 10 grams of 22KT gold. Now, if you wish to purchase a gold chain of 9.6 grams, the price will be calculated as:

  • Price of 1 gram of gold = Rs. 2,735(27,350 divided by 10) 
  • Price of 9.60 grams’ gold chain = 26,256( 2,735 times 9.60 grams )
  • Add making charges, suppose 10%, which comes to Rs 2,625.60 (10% of Rs 26,256)
  • Cost = 28881.60(26,256 + 2,625.60)
  • Add GST at 3%: Rs 866.44 (3% of Rs 28881.60)
  • The final billing amount will be Rs 29,748.04 (Rs 26,256 + Rs 2,625.60 + Rs 866.44
Different jewellers charge different rate

Different jewellers charge different rate

Why is Gold used in Jewellery?

Gold is a fantastic metal for jewellery because :

  • Gold is lustrous.
  • It’s durable: it does not rust, corrode, or tarnish over time or with wear and tear.
  • Malleability:  describes the property of a metals ability to be deformed under compression. Highly malleable materials can be readily rolled or hammered into sheets.
  • Ductility: Ductility describes the property of the ability to stretch a metal, without being damaged. Highly ductile materials are useful for stretching into wires.While the properties Ductility and Malleability are similar, different materials react differently in these circumstances. Gold or copper for example, are both highly ductile and malleable, whilst lead is only malleable.

Gold in its purest form is not suitable for jewelry as it would not be able to withstand the rigors of daily wear and tear. It is therefore alloyed with other metals to make it stronger and more suitable for making jewelry. Some interesting facts about Gold lists some facts about Gold :

  • The word gold derives from the Old English Anglo-Saxon word ‘geolo’ meaning yellow.
  • The chemical symbol for gold is Au, from the Latin aurum, which means ‘shining dawn’
  • Gold bars were made as early as 4000 BC
  • 75% of all gold ever produced has been extracted since 1910. It has been estimated that all the gold in the world that has ever been refined would form a single cube 20 m (66 ft) a side.
  • The price of gold is fixed twice a day at 10.30 am and 3.00 pm at the premises of N M Rothschild by the five main Bullion Houses – Deutsche Bank, HSBC, NM Rothschild, Scotia Mocatta and Societe Generale. The first gold fix was on 12th September, 1919 and this tradition has continued in order to provide a publicly quoted price as a benchmark to be used by producers and consumers.

Purity of Gold or Karat

The Gold content in a metal is measured in terms of karats (“k” or “kt”). Pure Gold or 100% Gold is referred to as 24k Gold. When we say 24kt or 24k Gold jewelry, we mean that all the 24 parts in the gold are just pure gold without traces of any other metal(s) or 99.9 percent pure.

When this pure Gold is alloyed with other metals, such as silver, copper, or nickel, the Gold percentage decreases.  When we say 22kt or 22k Gold Jewelry we mean that 22 parts of the jewelry, is gold and the balance 2 parts are some other metal(s) or equal to 91.3 percent gold plus 8.6 percent of some other metal alloy. Similarly 18k Gold is 18/24th or 75% pure Gold, and 14k Gold is 14/24 or 58.3% pure Gold.

As the percentage of pure Gold decreases, the strength of the metal increases: so 14k Gold is stronger than 18k Gold. Additionally, as the percentage of pure Gold decreases, the price of the metal also decreases: so 14k Gold will cost less than 18k Gold.

24 karat Gold equals 100% pure Gold too soft for jewelry
22 karat Gold equals 91.7% Gold Popular in certain parts of the world such as India
18k Gold equals 75% Gold Good balance of strength and value
14 karat Gold equals 58.3% Gold Good balance of durability and value.
12 karat Gold equals 50% Gold Not used for jewelry
10 karat Gold equals 41.7% Gold Lowest Gold content that can be legally marked as Gold in the United States.
In the United States, all Gold jewelry is marked with its karat weight, designated by 24k, 18k, 14k etc.
In Europe, jewelry is marked by a number which is the percentage of Gold in the alloy, for example, 18k is marked “750” to designate the 75% of Gold in the metal.

Difference between Carat and Karat

Carat and Karat are not to be confused. There is more to them then their slightly different spelling.
Carat is associated with  diamonds, is related to weight and is spelled with a C.
Karat  is associated with gold, signifies percentage of Gold and is spelled with a K..
Carat is not a percentage, it is rather a measure in which gemstones are weighed. The word carat was derived from the carat seeds which were once used for measuring as they were mostly constant in weight. 1 carat  is equal to about 200 milligrams or about 1/5th of a Gram. For example a huge 5 carat piece of diamond would be just 1 gram in weight.

Color of Gold

Gold has a warm yellow color in its purest form. Even when it is alloyed with other metals such as silver, nickel or palladium to make 14k or 18k Gold, it retains a yellowish color. The richness of the Gold color is directly affected by the percentage of Gold in its alloys: therefore, 18k Gold has a richer Gold color than 14k Gold. But addition of some other metals can change it’s color for ex: if copper would be added to alloy then the gold would appear reddish, instead of the yellow or if any of the white metal was added to the alloy it would make it appear white. Hence we often hear of white gold, green gold, rose gold etc.
Gold of different colors

Gold of different colors

Various colors of gold:

  • White gold is an alloy of gold and at least one white metal, usually nickel, manganese or palladium.
  • Rose, red, and pink gold : is made by adding copper. Higher the copper content, the stronger the red coloration. A common alloy for rose gold is 75% gold and 25% copper by mass (18k)
  • Green gold are made by leaving the copper out of the alloy mixture and just using gold and silver. It actually appears as a greenish yellow rather than green
  • Grey gold are made by adding silver, manganese and copper in specific ratios to the gold

Colored golds can be classified to three groups:

  • Au-Ag-Cu system:  Colour variations of yellow, red and green can be obtained by different ratios of Gold(Symbol: Au), Silver(symbol: Ag) and Copper (symbol Cu) Hence this system of making colored gold is known as Au:Ag:Cu system. A multitude of hues and colours can be obtained in the Au-Ag-Cu system alone by variation of composition as shown in the Figure below:
  • Colored gold using Au-Ag-Cu System

    Colored gold using Au-Ag-Cu System

  • Intermetallic compounds, producing blue and purple golds, as well as other colors. These are typically brittle but can be used as gems and inlays
  • Surface oxide layers, such as black gold; mechanical properties depend on the bulk alloy, and the colored surface is prone to wear
There are hundreds of possible alloys and mixtures, but in general the addition of silver will color gold white, and the addition of copper will color it red. A mix of around 50/50 copper and silver gives the range of yellow gold alloys the public is accustomed to seeing in the marketplace. Colored Gold Alloys (pdf) reviews the formation of, and assessment of, colour in metals, as well as the different coloured gold alloys and their properties.

Hallmarking of Gold

A Hallmark indicates that the gold content in the jewellery has been evaluated and that the gold adheres to international standards of purity. So you can take the gold quality as claimed by the jeweller to be genuine. A Hallmark – or Standard Mark – for gold jewellery is awarded by the Bureau of Indian Standards (BIS). BIS Hallmark consists of five parts.

  • The first is the logo of the BIS Standard Mark.
  • The second is the fineness mark. This refers to the gold caratage and is represented as the amount of gold in parts out of 1000. So, if the mark says 916, then it means that gold forms 91.6 per cent of the total metal.
  • The third part of the hallmark is the mark of the assaying centre which carries out the certification process, represented by a logo. The list of hallmarking centres with their symbols can be found on the Website of the BIS.
  • The fourth part is the logo of the jeweller.
  • The final part is the year of marking, represented by a code approved by the BIS. For instance, ‘A’ denotes the year 2000, ‘B’ 2001 and so on.
BIS Hallmark

BIS Hallmark

The Jewellers has to obtain a licence from BIS for a fee and hallmark the jewel they make with BIS logo. The other features are:

  • At every outlet an illustration of the Hallmark, explaining its components.
  • A magnifying glass as the Hallmark is usually small to make a proper check.
  • Further, let’s say you’ve checked up on the jeweller and seen the mark and so on, but are still doubtful of the gold’s authenticity. You can go to an authorised Assaying and Hallmarking centre and get the gold tested. While you do have to pay testing charges, if your suspicion turns out right and the gold’s purity is less than what is marked, the charges will be refunded. Your jeweller will also have to provide a replacement.
  • BIS maintains market surveillance on the certified jewellers, on random basis. Market surveillance involves collection of Hallmarked Gold Jewellary from licencee’s retail outlet/manufacturing premises and having it tested for conformity in BIS recognized hallmarking centre. Deviations in degree of purity of gold and operation not in conformance to the system may result in cancellation of BIS licence.

On 11th April 2000, the BIS launched its hallmarking scheme. The basic objectives of the scheme were Consumer Protection, to enhance exports, to improve the quality and purity of gold jewellery produced and to monitor any loss to the economy due to the improper caratage. Presentation on BIS (2007) explains about the BIS Hallmark. For more information on BIS Hallmark visit their website BIS:Hallmark

KDM Mark of Gold

Gold Jewelry from some places is / was marked with a KDM stamp which simply means that the Jewelry was soldered with Cadmium. Cadmium also called ‘Kadium’  was traditionally used in soldering of gold jewelry for its good properties of liquidity and melting at lower temperatures. Smoke emanating from cadmium soldering caused health hazards to artisans.  In many countries, the KDM seal was made compulsory as a warning to those using it. Subsequently, KDM-marked jewellery was banned in many countries. KDM does not stand for quality. Using any type of gold solder either KDM (Cadmium) or other gold solder to make the jewelry does not guarantee the purity of gold, as the purity is a representation of the percentage of gold in any metal.  KDM mark is a “statutory warning” against use of jewellery made with cadmium soldering. However, the jewellers often advertise KDM as a quality-mark and sell the jewels at a premium.
Jeweller advertising KDM mark

Jeweller advertising KDM mark

Why do Indians buy Gold?

Indians buy gold because :

  • Gold is considered as Status Symbol
  • Gold is considered an equivalent for liquid cash :  It can be converted to cash anytime when an emergency arises
  • Gold is a very good investment :  Gold has consistently increased in value and thereby considered as a safe and secure investment.
  • Gold has great religious significance: Gold is the symbol of the Hindu Goddess Lakshmi and considered highly auspicious. Gold is considered sacred in every hindu religious festival because of the belief that gold becomes pure during its evolution process as it passes through fire.  The Hindu calendar even has auspicious days to buy gold like Dhanteras and Akshaya Tritiya. Gold is also bought on festivals like Onam, Pongal and Durga Puja.

Gold always had a special significance in all ages.

  • Gold was one of the three gifts given by the three wise men on the birth of Jesus according to the Holy Bible.
  • According to the Hebrew Bible, the golden calf was an idol made by Aaron to satisfy the Israelites during Moses’ absence, when he went up to Mount Sinai. The calf was intended to be a physical representation of the God of Israel. Details at Wikipedia:Golden Calf
  • A story in the Hindu Mythology states that during the creation of the Universe, the Creator, God Brahma, deposited a seed in the waters made from his body which became a golden egg. The remaining materials of this golden egg expanded into the Brahmānḍa or Universe.  Hence Brahma is referred to as Hiranyagarbha which means born of gold as he is born from the cosmic egg of gold. Wikipedia:Brahma

Did you know: Toe rings are never made of gold as it represents the goddess of wealth and should not be soiled by touching a human’s feet.

When And Why Indians Buy Gold Jewellery

In India most of gold is bought in form of jewellery. Given below are charts from Business Insider:Morgan Stanely Chart  (May 2012)

Why Indians buy gold?

Why Indians buy gold?

 

When Indians buy gold?

When Indians buy gold

Related Articles:

 “All that Glitters is not gold” In this article we explained about Gold, purity, different color of gold green gold, pink gold, about hallmarking of gold, when and why Indians buy gold. In next article we shall talk about how gold jewellery is priced, wastage and making charges etc.
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