Reporting from DUBAI: When gold price soars, it’s easy to imagine jewellers laughing all the way to the bank. Every sovereign, every necklace, every earring is suddenly worth that much more.
But here’s the twist: in the trade’s own accounting, the surge in gold price doesn’t automatically translate into profit from the metal itself.
Jewellers who hedge their metal exposure — and most big ones do — neither lose nor gain much when gold price rises. The metal’s price is merely passed through from supplier to customer.
Yet behind the glitter lies a quiet killing — not from gold itself, but from the art of pricing the craft.
Hidden goldmine called “making charge”
Every ornament carries what’s called a making charge — the cost added over the metal’s value to cover labour, design, and gold lost as wastage while crafting.
In theory, this charge compensates for three things:
• Wastage – the tiny portion of gold lost during cutting, melting, soldering, and polishing.
• Labour – the craftsmanship and time of goldsmiths who shape each piece.
• Margin – the jeweller’s own mark-up for design, branding, and retail costs.
Traditionally, the entire making charge is quoted as a percentage of the gold price — anywhere between 2–3 per cent for simple bangles to 20–30 per cent and more for intricate necklaces.
Now, here’s where the magic — and the maths — work in the jeweller’s favour.
When gold price jumps, the making charge inflates automatically as it’s calculated in percentage of gold price.
Let’s assume the jeweller sells a necklace or similar piece of jewellery for which the gold component cost Rs1 lakh. If the jeweller charged a 20 per cent making charge, that’s Rs20,000.
This year, with gold up about 60 per cent, the same gold costs Rs1.6 lakh. The making charge — still 20 per cent — is now Rs32,000.
Nothing about the labour or design has changed. But the rupee margin has swelled by Rs12,000 — purely because the base price rose. In other words, the same effort now earns more, not because craftsmanship became costlier, but because the denominator — gold — got fatter.
Wastage is a pretext, not the full story
Jewellers often justify this percentage-based calculation by citing gold wastage: “If gold price rises, the wastage loss also rises, so the making charge must rise too.”
That’s true only in part. Wastage is real, typically 5–7 per cent of gold value, but even at higher prices, that incremental cost is quickly absorbed.
What’s not talked about is that wastage losses are usually borne by the goldsmiths — the artisans who work on contract rates per gram of gold.
The remaining portion of the making charge — the labour and margin component — keeps rising in absolute rupee terms with every uptick in gold price, even though the underlying costs (man-hours, electricity, rent) hardly change. That’s where the silent windfall lies.
Jackpot on the making charges
In the formal market, jewellers hedge their gold through forward contracts or gold metal loans (GMLs), insulating themselves from daily price movements.
When gold rises, their inventory value increases, but so does the replacement cost of fresh stock. That’s why profits from the metal itself are often muted — what they gain on old stock is partially offset when replenishing inventory.
However, since making charges are pegged as a percentage of the inflated gold value, the jeweller’s effective profit from that line item balloons — even without touching the gold price directly.
As one leading jeweller put it bluntly while talking to businessbenchmark.news: “Ninety-plus per cent of our profit comes from the cut on making charges. Gold itself gives us nothing.”
That “nothing” now translates into a lot — because the base price of gold has never been higher.
Who actually loses?
The artisans who shape the ornaments — the real goldsmiths — rarely see this bounty. Though they also receive their fee in percentage terms to cover wastage and labour, they don’t stand to gain anything extra from the price rise and are unlikely to save anything from the new price scenario.
The consumer, meanwhile, pays a making charge that has doubled in rupee terms purely because gold became costlier, not because craftsmanship got dearer, and this making charge is not recoverable by the consumer in the event of resale.
And the jeweller? Perfectly hedged, perfectly timed, earning more per gram sold than ever before.
Why this is the jeweller’s golden period
The current bull run in gold has done two things:
- It’s raised the face value of every ornament, lifting working capital and inventory valuations.
- It’s inflated making charges in rupee terms, even with sales volume moderating slightly.
Even if fewer customers buy, each sale now yields higher per-piece profit.
This is why, in industry circles, 2025 is quietly being called the golden period of jewellers — a windfall not from speculation or luck, but from a pricing formula that automatically fattens margins when gold rallies.
Golden bonanza in disguise
Gold’s rally may not automatically make jewellers richer from the metal itself — but thanks to the percentage-based making charge, it’s a golden bonanza in disguise.
