How karat and weight work

Karat is a measure of purity, and weight is a measure of mass. 24 karat is pure gold. 22 karat is twenty-two parts gold out of twenty-four, 18 karat is eighteen parts, and 14 karat is fourteen parts. A price per gram is turned into the price of a piece by multiplying by the weight, and the jeweller's total differs from the metal value because of the making charge, wastage, and buy-back deduction.

What karat means

Karat is the fraction of pure gold in a piece, out of twenty-four parts. 24 karat is pure gold: all twenty-four parts are gold. 22 karat is twenty-two parts gold and two parts other metals, usually copper or silver. 18 karat is eighteen parts gold and six parts other metals. 14 karat is fourteen parts gold and ten parts other metals.

The other metals are added to make the gold harder and to change its colour. Pure gold is soft and scratches easily, so most jewellery is made in a lower karat. The karat stamp on a piece promises that fraction, but the stamp is not a guarantee, and a buyer should ask the jeweller to test the piece.

How a gram price becomes a piece price

The price per gram is the metal value for one gram of that karat. To get the metal value of a piece, multiply the price per gram by the weight of the piece in grams. For example, a five-gram piece at a certain price per gram costs five times that price. The metal value is linear: twice the weight, twice the metal value.

But the price a buyer pays is not just the metal value. The jeweller adds a making charge for labour, and sometimes a wastage fee. The making charge is not linear: a heavy piece may have a lower making charge per gram than a light piece. The total is the metal value plus the making charge plus any wastage.

The making charge

The making charge is the jeweller's labour and profit. It is added to the metal value when you buy. It can be a flat fee or a percentage of the metal value, and it varies from shop to shop. A simple chain has a lower making charge than an intricate piece with stones.

The making charge is the largest part of the gap between the derived metal value and the till price. A buyer should ask the jeweller to write down the per-gram rate and the making charge separately, so the two can be compared. The per-gram rate is the metal value; the making charge is the cost of the piece.

Wastage

Wastage is a charge for the metal lost during making. When a jeweller melts gold to make a piece, some is lost as dust or in the polishing. The jeweller may add a wastage fee to cover that loss. Wastage is usually a percentage of the metal value, and it is added to the making charge.

Not all jewellers charge wastage separately; some include it in the making charge. A buyer should ask whether the making charge includes wastage, and if not, how much the wastage fee is. Wastage is a real cost, but it is not a metal value, and it should be written down.

The buy-back deduction

When a buyer sells a piece back to a jeweller, the jeweller pays the metal value minus a buy-back deduction. The deduction is the jeweller's margin for taking the piece, and it covers the risk that the piece is under-karat or that the price will fall before the jeweller can sell it.

The buy-back deduction is usually a percentage of the metal value, and it is set by the shop. A buyer should ask for the buy-back terms in writing before buying, because the deduction can be large. The buy-back price is the metal value minus the deduction, not the price the buyer paid.

The total cost of a piece

The total cost of a piece is the metal value plus the making charge plus any wastage. When the piece is sold back, the seller receives the metal value minus the buy-back deduction. The difference between the buying price and the selling price is the cost of owning the piece.

A buyer who understands this will not be surprised when a jeweller offers less than the purchase price. The metal value is the same, but the making charge and wastage are not recoverable, and the buy-back deduction is a cost. The derived price on this page is the metal value only, and the rest is the jeweller's charge.