Gold Jewellery Pricing Formulas or Models

Being a regular buyer of jewellery from different jewellery stores in Hyderabad and some parts of Telangana, one thing that I have learnt is that there is no standard formula/model for pricing jewellery items. Based on my own experience, the pricing of jewellery items, whether for a brand with a single store or a chain of stores falls into 4 main varieties.

In this post, I will explain these 4 different ways or formulas of pricing jewellery items to help you with your shopping. Especially during “Jewellery Sale” season when stores are offering discounts, you can use these examples to compare and see what you are really gaining from the offer.

However, it is to be noted that even after so much of experience with these jewellery pricing models, I sometimes knowingly pay more (based on a costlier pricing model) when the jewellery piece has such a unique design that we can’t get the same/similar piece elsewhere.

Below are the details of a necklace that we will use in explanation of pricing in all the 4 ways.

Gross weight: 60 gms

Net weight: 50 gms

Emerald: 20 carats

Ruby: 20 carats

Gold Jewellery Pricing Formula / Model 1

Model Description: Detailed pricing with Chennai rate and only wastage charges applied

Gold Rate: 2850

Gold Cost = 50 * 2850 = 142500

Value Add: 12%

Value Added Charges = 142500 * .12 = 17100

Gold cost (including Value Add) = 159600

Other formula to get above figure is:

Gold cost (including Value Add) = (50 + (50 * .12) ) * 2850 = 159600

Stone Cost:

Emerald = 20 * 400 = 8000

Ruby = 20 * 800 = 16000

Item Cost = Gold Cost + Value Add + Stone Cost = 183600

GST: 3% of Item Cost = 550.8

Total Cost = 184150.8

Gold Jewellery Pricing Formula / Model 2

Model Description: Detailed pricing with Hyderabad rate and only wastage charges applied

Gold Rate: 2950 - this is usually around Rs. 100 more than Chennai rate.

Gold Cost = 50 * 2950 = 147500

Value Add: 12%

Value Added Charges = 147500 * .12 = 17700

Gold cost (including Value Add) = 165200

Other formula to get above figure is:

Gold cost (including Value Add) = (50 + (50 * .12) ) * 2950 = 165200

Stone Cost:

Emerald = 20 * 400 = 8000

Ruby = 20 * 800 = 16000

Item Cost = Gold Cost + Value Add + Stone Cost = 189200

GST: 3% of Item Cost = 567.6

Total Cost = 189767.6

If you compare, the final price ended being around 5500 more than the Chennai rate.

Gold Jewellery Pricing Formula / Model 3

Model Description: Detailed pricing with Chennai rate, wastage and making charges applied

Gold Rate: 2850

Gold Cost = 50 * 2850 = 142500

Wastage: 10% - this is usually lower when there is a making charge applied

Wastage Charges = 142500 * .10 = 14250

Making Charges = 4000

Value Add (Wastage + Making) = 18250

Gold cost (including Value Add) = 160750

Other formula to get above figure is:

Gold cost (including Value Add) = ( (50 + (50 * .10) ) * 2850) + 4000 = 160750

Stone Cost:

Emerald = 20 * 400 = 8000

Ruby = 20 * 800 = 16000

Item Cost = Gold Cost + Value Add + Stone Cost = 184750

GST: 3% of Item Cost = 554.25

Total Cost = 185304.25

If you compare, the final price ended slightly higher than the Model 1 where we have Chennai Rate and no making charges.

Gold Jewellery Pricing Formula / Model 4

Model Description: Detailed pricing with Hyderabad rate, wastage and making charges applied

Gold Rate: 2950 this is usually around Rs. 100 more than Chennai rate.

Gold Cost = 50 * 2950 = 147500

Wastage: 10%

Wastage Charges = 147500 * .10 = 14750

Making Charges = 4000

Value Add Charges (Wastage + Making) = 18750

Gold cost (including Value Add) = 166250

Other formula to get above figure is:

Gold cost (including Value Add) = ((50 + (50 * .10) ) * 2950) + 4000 = 166250

Stone Cost:

Emerald = 20 * 400 = 8000

Ruby = 20 * 800 = 16000

Item Cost = Gold Cost + Value Add + Stone Cost = 190250

GST: 3% of Item Cost = 570.75

Total Cost = 190820.75

This is the costliest model of all. This is case where we have Hyderabad rate that is more than Chennai rate and also includes wastage and making charges.

Below are 2 additional models that are not often used in jewellery stores in Hyderabad but covering these since I am aware of these.

Gold Jewellery Pricing Formula / Model 5

Model Description: Weight * gold and no reduction in stone weight

This model is applied for jewellery items that have very less amount of stones. Instead of reducing the stone weight from the gross weight, the gold rate and other charges are applied on the gross weight (full weight) of the item instead of the net weight.

We will use a different item in this case than the one in above examples as this model has no calculation for stones.

Gross Weight = 50 gms

Gold Rate: 2850

Gold Cost = 50 * 2850 = 142500

Wastage: 10%

Value Add (Wastage Charges) = 142500 * .10 = 14250

Gold cost (including Value Add) = 156750

Other formula to get above figure is:

Gold cost (including Value Add) = ( (50 + (50 * .10) ) * 2850) = 156750

GST: 3% of Gold Cost = 470.25

Total Cost = 157220.25

Gold Jewellery Pricing Formula / Model 6

24 carat gold rate applied instead of 22 carat gold rate

Some stores do not apply any wastage charges but they apply 24 carat rate instead of 22 carat rate. Effectively the customer pays 8.4% wastage as thats the difference between 24 carat (100% purity) and 22 carat (91.6% purity). In these cases, there is a making charge also applied in addition to the 8.4% wastage.

So next time you buy jewellery, make sure you check the model using which the item is priced :)