How Gold Prices Are Calculated in India

The rate you see at a shop is the end of a chain that starts thousands of kilometres away.

Step 1 — International spot price

Gold trades globally in US dollars per troy ounce (31.1035 grams). London (LBMA) and COMEX set the reference. This price moves with real interest rates, the dollar, central bank buying and risk sentiment.

Step 2 — Convert to rupees per gram

$/oz is converted to ₹/gram using the USD-INR rate. This is why gold in India can rise on a day when global gold is flat: a weaker rupee alone lifts the domestic price.

₹/gram = (USD per ounce × USD-INR) ÷ 31.1035

Step 3 — Add import duty and levies

India imports nearly all its gold. Basic customs duty, the agriculture infrastructure and development cess and other levies get added to the landed cost. Changes to duty in a Union Budget can move retail prices in a single day, independent of global markets.

Step 4 — Add the local market premium or discount

Physical demand matters. In a strong wedding or festival season, dealers charge a premium over landed cost. In weak demand, gold can trade at a discount. This is also why city rates differ — Chennai and Kerala typically carry a higher premium than Delhi or Ahmedabad.

Step 5 — The association rate

Local jewellers' associations and IBJA publish reference rates, commonly twice a day. Most retailers quote off these.

Step 6 — Retail: karat, making, wastage, GST

Finally, at the counter:

1. The 24K rate is converted to your karat (× 0.916 for 22K, × 0.750 for 18K).
2. Multiply by net gold weight.
3. Add making charges — either a flat ₹/gram or a percentage.
4. Add wastage, where the jeweller charges it separately.
5. Add GST on the total.

What this means for you

The spot price explains the direction. The last three steps explain most of the difference between two quotes for the same necklace. When comparing jewellers, compare making charges and wastage — the metal rate is the part they all broadly agree on.