Is Gold Jewellery a Good Investment? Beware 30% Hidden Loss!

Is Gold Jewellery a Good Investment? Learn how wastage, making charges & GST silently eat up to 30% of your money — plus smarter ways to invest in gold.

Gold holds a special place in every Indian household — whether it’s for a wedding, a festival, or simply an investment for tough times. We Indians love buying gold, especially as jewellery. But have you ever wondered how much of your hard-earned money goes waste when you buy a gold chain, ring, or bangle?

Most people think, “Gold is gold — it will always hold value!” But the reality is quite different. When you buy gold jewellery, you don’t just pay for the gold. You also pay for wastage, making charges, and taxes — all of which quietly eat away at your investment.

In this post, I will explain, in simple words, how much you actually lose when buying gold ornaments — with real examples, calculations, and tips to save yourself from unnecessary losses.

Is Gold Jewellery a Good Investment? Beware 30% Hidden Loss!

What Determines the Cost of Gold Jewellery?

When you walk into a jewellery shop and ask for a gold chain, you pay more than just the gold’s market price. Your final bill includes:

Gold Price: Based on current market rate for pure gold (24K).
Purity: Jewellery is usually 22K or lower, not pure 24K.
Wastage: Extra gold lost in making the ornament, so you pay for it too.
Making Charges: Labour cost to design, cut, polish, and finish the piece.
GST: 3% tax on the entire amount.

How Purity Affects Your Gold’s Value

Pure gold is 24 Karat (99.9% pure). But ornaments are rarely made in 24K because pure gold is too soft.

Most Indian jewellery is 22K (91.6% pure) or 18K (75% pure). So, when you buy 10 grams of 22K gold, it only contains 9.16 grams of pure gold. This already means a small portion of your money goes towards other metals mixed to make the gold durable.

The Hidden Cost of Wastage

Jewellers often mention a “wastage charge”. Why? When they melt, cut, or polish gold, tiny amounts are lost. Traditionally, they charge 5% to 10% as wastage, though modern technology makes real wastage minimal.

For simple, machine-made jewellery, wastage might be 3%–5%. For handcrafted, delicate designs, it can go up to 15%.

This wastage is added to your bill — you pay for gold that you don’t even get to keep!

Making Charges: The Labour Fee You Never Get Back

Making charges can vary widely:

• Machine-made chains or bangles: 8%–12% of gold value.
• Intricate handmade jewellery: 15%–25%.

This cost is non-refundable. If you ever sell the ornament, no jeweller will pay you for making charges.

Buying Price vs Selling Price Difference — The Hidden Shock

Many gold buyers assume that when they sell back their gold jewellery to a jeweller, they will get the same prevailing gold rate per gram. Unfortunately, that’s far from reality.

Jewellers usually buy back old jewellery at a discounted rate compared to the day’s market price. For example:

• They may deduct 2% to 5% from the prevailing gold rate as their margin.
• Some jewellers may also reduce the rate further if the ornament is damaged, stones are missing, or it’s an outdated design.
• On top of this, the making charges and wastage charges you paid while buying are never refunded — they’re gone forever.

Example –

Suppose the market price of 22K gold today is Rs.1,000 per gram.

• When you buy, you pay Rs.1,000/g + making charges + wastage + GST.
• When you sell, the jeweller may buy it back at only Rs.950–Rs.980 per gram, depending on purity, deductions, and policy.

So, not only do you lose on making and wastage, but you also lose on the lower buyback rate — adding another 2–5% hit to your pocket.

GST: The Tax You Forget

When you buy jewellery, 3% GST is charged on the total — gold value + wastage + making charges.

Again, this tax is not recoverable when you sell the gold later.

Real Example: How Much You Actually Lose

Let’s take a simple, practical example:

• Market price for pure gold (24K): Rs.1,000 per gram (hypothetical)
• You buy a 10 gram 22K gold chain

Your bill:

Component	Amount
Gold value (10g)	Rs.10,000
Wastage 10%	Rs.1,000
Making charges 10%	Rs.1,000
Subtotal	Rs.12,000
GST 3%	Rs.360
Total paid	Rs.12,360

So, you pay Rs.12,360 for an ornament with only 9.16 grams of pure gold in it.

Now, Let’s See What Happens When You Sell It Back!!

After a few years, you decide to sell your gold jewellery. For simplicity, let’s assume the market gold price stays the same at Rs.1,000 per gram. (Yes, I know prices don’t freeze — but this helps explain the hidden loss).

• The jeweller checks the purity and net weight: 9.16 grams
• Current market rate: Rs.1,000 per gram
• But jeweller’s buyback rate is usually 2% lower ? so they offer you Rs.980 per gram
• Gross value: 9.16g × Rs.980 = Rs.8,977
• Less melting & assay charges (around 3%): Rs.270
• Final amount you actually receive: ~ Rs.8,707

What Did You Really Lose?

• Amount paid when you bought: Rs.12,360
• Amount you got back: Rs.8,707
• Loss: Rs.3,653
• Percentage loss: ~30%

So, you lose nearly 30% of your money, even if gold prices don’t drop.

This is where most buyers get shocked — you pay the full price + making charges + wastage + GST, but when selling, you:

• Don’t get back any making or wastage charges
• Lose 2–5% on the buyback rate
• Pay melting and purity check deductions

Net result: A big chunk of your so-called “investment” simply vanishes!

What annual growth is needed to break even the LOSS?

We use CAGR (Compounded Annual Growth Rate):

Formula:
Final Amount = Initial Amount × (1 + r)^n

Where:

• Final Amount = Rs.10,000 (break even)
• Initial Resale Value = Rs.7,000 (after costs)
• n = holding period (years)
• r = annual growth rate

So,

10,000 = 7,000 × (1 + r)^n

(1 + r)^n = 10,000 / 7,000 = 1.4286

Required CAGR to break even the loss

5 Years holding period – ~7.36% per year

10 years holding period – ~3.63% per year

15 years holding period – ~2.36% per year

20 years holding period – ~1.79% per year

So, if you hold jewellery for:

• 5 years, gold must appreciate ~7.4% per year just to get your money back.
• 10 years, you still need ~3.6% annual growth to break even.
• 15 years, about ~2.4% annual growth needed.
• 20 years, about ~1.8% annual growth needed.

But wait — does gold beat inflation?

India’s long-term inflation is 5–6% per year. So, to actually grow your wealth above inflation, gold must appreciate by:

• Inflation (5–6%) + break-even CAGR

So for a 5-year holding, gold must grow at about 7.4% + 6% = 13–14% per year just to beat inflation and recover wastage losses.
For 10 years, it must grow at about 3.6% + 6% = 9–10% per year to actually deliver real returns.

What does history say?

Over the long term (20–30 years), gold in India has averaged 8–10% annual return, but:

• This includes periods of huge spikes (crisis years)
• For long stretches, gold barely moves in price (early 90s, early 2000s)
• Jewellery always loses to pure investment gold because of the wastage/making

(Note – Refer my articles on Gold where I have proved with around 45 years of data that even after holding for the long term, there is no guarantee that it will even beat inflation.)

Coins vs Ornaments — Which is Better?

What about gold coins or bars? They’re slightly better:

• Coins are usually 24K.
• Wastage is minimal (1%–2%).
• Making charges are lower (1%–3%).
• You still pay GST.

So, the resale loss for coins is around 5%–10%, much lower than for ornaments.

But you must sell them back to the same jeweller to get a better rate. Otherwise, new jewellers will deduct assay and melting charges again.

Best Ways to Invest in Gold Without Wastage

If your goal is investment — not jewellery for wearing — there are better options than buying physical gold:

Sovereign Gold Bonds (SGBs)
Issued by the RBI, these bonds are linked to gold’s market price. Even though new issues are not available, you can buy the old issues through the secondary market.

• You get the gold price at maturity.
• Earn 2.5% annual interest (extra return).
• No GST, making, or wastage.
• Maturity proceeds are tax-free.
  Perfect for long-term investors.

Gold ETFs (Exchange Traded Funds)
These are digital units linked to gold prices.

• You hold gold in Demat form.
• You pay a small expense ratio (~0.5%).
• No physical storage worries.

Gold Mutual Funds

• They invest in Gold ETFs.
• No headache of having a Demat Account.
• Selling and buying are easy directly with Mutual Fund Companies.
• Bit expensive in terms of cost if you compare it with the Gold ETF. But hassle-free investment.

Tips to Reduce Loss When Buying Gold Jewellery

Always buy BIS-hallmarked jewellery (certified purity).
Choose simple designs with low wastage.
Negotiate making charges — bigger shops often reduce them for good customers.
Keep the bill safe — needed for resale.
Sell to the same jeweller who sold you the piece.

Key Takeaway

Buying gold jewellery is a cultural joy — but never treat it as an investment. If you buy a gold chain today for Rs.1,00,000, understand that about Rs.25,000–Rs.30,000 will never come back. You pay for design, wastage, and taxes — all of which have no resale value.

So, next time you step into a jewellery shop, think carefully: Do you want jewellery for wearing or gold for investing?

For wearing, ornaments are fine, but for investing, Sovereign Gold Bonds, Gold ETFs, or gold mutual funds are smarter options that preserve your money’s value better.

Gold will always shine in our culture, but your money shouldn’t get wasted for no reason. Understand how jewellers price your ornaments, check the purity, negotiate making charges, and know your options.

As I mentioned above, if your reason for purchasing gold jewellery is as a commodity, then buy physical gold jewellery. But buying gold jewellery as an investment for your future requirement is a loss of money and a risk of safekeeping.