Gold is quoted as one global price, yet the number in your local market is different, and the gap is not a markup someone invented. Both parts follow rules worth understanding before buying.
What moves the global price
- Real interest rates. The most reliable single driver. Gold pays no income, so when inflation-adjusted returns on bonds fall, holding gold costs less and demand rises.
- The dollar. Gold is priced in dollars internationally. A stronger dollar usually means a lower dollar price, and the reverse.
- Central bank buying. Central banks hold gold as reserves, and sustained official purchases have been a significant source of demand in recent years.
- Risk and uncertainty. Gold attracts money during financial stress, which is why prices often move sharply on news that has nothing to do with mining or jewellery.
- Supply, slowly. Mine output changes gradually and rarely explains a move in any given week.
Why your local price is different
The local price starts from the international price converted at the exchange rate, then adds the costs of getting physical metal into the country and into a shop. That means import duty and taxes, transport and insurance, refining or minting, and the dealer margin.
The exchange rate is the part that surprises people. If the local currency weakens against the dollar, the local gold price rises even when the international price has not moved. In countries with volatile currencies, currency movement frequently explains more of the local price change than gold itself.
Purity and why quoted prices differ
Gold is sold at different purities, commonly 24, 22 and 18 karat. Twenty-four karat is nearly pure; 22 karat is about 91.6 per cent gold; 18 karat is 75 per cent. A price quoted per unit weight is only comparable at the same purity, and jewellery is usually sold at lower purity because pure gold is too soft to wear.
Jewellery also carries a making charge for the craftsmanship, which is not recoverable when you sell. That is the single largest reason jewellery is a poor way to hold gold as an investment: you pay for the work and get back only the metal.
Buying sensibly
Ask for the purity in writing, weigh the item in front of you, and establish the buy-back terms before paying, because dealers differ enormously on what they will pay to take an item back. Hallmarking, where a national assay system exists, is the practical protection against being sold something less pure than described.
None of this is investment advice, and gold can and does fall for long periods. It is a commodity with a volatile price, not a guaranteed store of value.
Common questions
Why did the local price rise when the global price fell? Almost always currency movement. A weakening local currency can more than offset a falling dollar price.
Is 22 karat better than 18 karat? It contains more gold, so it costs more per unit weight. It is also softer and less durable, which is why 18 karat is common for pieces worn daily.
Are coins better than jewellery? For holding value, usually. Coins and bars carry smaller premiums over the metal price and are easier to sell at a fair rate.
Why do two shops quote different prices on the same day? Different margins, different purities, and different making charges. Compare per gram at identical purity or you are not comparing anything.
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