Gold prices differ across Indian cities due to local demand, smuggled supply, and lack of a single benchmarked spot price
Chennai: While gold prices keep making headlines, hitting new highs almost on a daily basis, customers are often left confused as cities have different spot prices and jewellers quote another set of rates.
Despite India being one of the largest gold consuming markets, it does not have a single benchmarked spot price. So each city has a different spot price for 24 carat gold (995 purity). The price difference between cities is sometimes as high as Rs 2500 per 10 gm on a given day.
Usually, gold price in India is benchmarked against the London Bullion Market Association's spot price of the day. Ideally, this price is converted as per the day’s rupee rate and the customs duty and GST is added to arrive at the landed price.
The Multi Commodity Exchange and bullion associations in some cities do not include the GST rate while releasing the day's spot rate. For them, the price will be lower.
Further, the supply and demand for gold in each city gets reflected in the rate. Some of the city-level bullion associations see whether the gold is available at a premium or discount to arrive at the rate.
It has been generally noticed that cities which have a higher share of smuggled gold available in the market, quote a lower price due to higher supply of low-priced gold.
While gold rate is largely quoted for 24 carat, while the jewellery available in retail stores in India is mostly 22 carat or that with 916 purity. 916 purity means the jewellery will have 91.6 grams of pure gold in 100 gram of alloy. The rate of 22 carat gold at the jeweler will be lower than that of 24 carat.
Some cities like Chennai have a 22 carat gold price fixed daily for the jewelers to follow. Madras Jewellers and Diamond Merchants Association publishes this rate daily on its website. Indian Bullion and Jewellers Association publishes the rates of 24, 22, 20, 18 and 14 carat on their website.
“But a few cities do not have a common 22 carat gold price. In those cities, the gold price can vary from jeweller to jeweller. Further, based on the price of copper and other metals in the alloy, the jeweler can offer the jewellery at a different rate,” said Surender Jain of Delhi Bullion Association.
The World Gold Council has been advocating the need to set up a spot gold exchange for the entire country and have a single benchmarked spot price. WGC finds that this will provide an efficient and trusted ecosystem for trading gold with an aim to improve market transparency and protect the interests of market participants and end consumers.
