Making charges in gold trading
Making charges are the fee a jeweler adds for crafting an item, as a percentage of the gold value or a per-gram rate; they are lost on resale.
Also called Labor charges, Fabrication charges, Wastage
Making charges are what a jeweler charges to turn gold into an ornament: the labor, design and finishing. In India and the Gulf they are quoted either as a percentage of the gold value (commonly in the range of several percent to over 20% for intricate work) or as a flat rate per gram, sometimes alongside a “wastage” percentage for metal lost in fabrication. They are added on top of the metal price and any tax.
How it applies to gold trading
Making charges are the reason jewelry is a poor proxy for the gold price. A 22K necklace bought for the metal value plus 15% making charges plus tax sells back for the metal value at best, usually less, so the buyer starts 15% to 20% behind, far more than the premium on a bullion coin or the spread on a spot trade. Analysts tracking jewelry demand in India and China adjust for this when comparing jewelry sales with investment demand.
For a trader converting a jewelry quote to the international price, the making charge must be stripped out, along with tax and purity, before the comparison means anything.
Festival periods such as Dhanteras and Diwali in India are when jewelry demand peaks and jewelers compete most visibly on making charges, so quoted rates can differ from the rest of the year.
A common mistake
Treating a jewelry purchase as a gold investment. The gold inside is an investment; the making charge is a consumption cost that does not come back.
See also: Karat, Gram and 10-gram pricing, Coin premium, Import duty.
Frequently asked questions
Are making charges refunded when I sell gold jewelry?
No. Buyers pay for the gold content only, usually at a discount to the day’s rate, so making charges and taxes are lost on resale.
How are making charges calculated?
Either as a percentage of the item’s gold value or as a fixed amount per gram, sometimes with a separate wastage percentage. The method and rate vary by jeweler and by the complexity of the piece.