Whatever may be experts opinion on gold and at whatever price Gold may jump, we Indians never ever stay away from buying gold jewellery. It is considered as one of the major cost in Indian marriages. 50% of gold jewellery are bought for weddings or wedding anniversary.
The size of the gold market in India is estimated at around $15 billion. But sadly it is one of the worst regulized sectors in India, where you can’t guarantee the quality and price. So let us explore what caution we need to take care.
Who decides the world gold price?
Five banks sitting in London fix the price of the gold for that particular day 🙂 This is the tradition since 1919. Banks involved in this price fixing are Barclays, Deutsche Bank, Bank of Nova Scotia, HSBC Holdings and Societe Generale. Price is published twice in a day (at 10:30 GMT and 15:00 GMT). London is the place where the largest volume of gold trade takes place in the world. This price will be followed by other countries. Price of gold changes daily, due to hundreds of factors, ranging from the opening of a new gold mine, to the changes in interest rates of one currency or another. The gold market is probably the largest and most free market in the world among commodity market.
So the major flaw starts from here itself.
How to convert gold price in India?
In India we follow the USA price. In USA gold is weighted in terms of troy-ounce which we need to convert into grams. Jewellers internationally use pennyweight which is equivalent to 1.555 grams.
The domestic price of gold = (London Bullion Market Association AM fixing in US$/ounce X conversion factor for
converting ounce into kg for 0.995 fineness X rate for US$ into INR) + custom duty for import of gold + sales
Tax/octroi and other levies applicable.
But the trustee of mutual fund company reserves the right to change the source for determining the exchange rate. The mutual fund company shall record it writing by mentioning the reasons for change.