Gold Making Charges: How They're Calculated and Negotiated

The making charge is the amount a jeweller adds on top of the value of the raw gold to cover making and finishing the piece, plus the shop's margin. It is usually calculated as a fixed amount per gram, as a percentage of the gold value, or as a single price for the piece, and it is very often negotiable. Most importantly, it is generally not recovered when you resell, because the shop buys gold by weight and karat only.

What is a making charge?

When you buy a piece of gold you are really paying for two things. The first is the gold itself: the weight multiplied by the price per gram for the karat you chose. The second is the work that went into making the piece. That second part is the making charge. It covers craftsmanship, design, polishing and setting, along with part of the shop's costs and profit.

That is why you can find two pieces of the same weight and karat at completely different prices. The difference is not in the gold, but in the making charge. Before comparing two shops, check today's gold price and the 21K gold price per gram so you know the actual value of the gold in the price you are quoted. Whatever sits above that is the making charge and the fees that come with it.

Ways of calculating the making charge

Shops usually use one of three methods, and may combine them:

Per-gram making charge

This is the most common and the clearest. The seller tells you, for example, that the making charge is 250 pounds per gram, and you multiply that by the weight of the piece. Its advantage is that you can compare it directly from one shop to another.

Per-piece making charge

For some pieces, especially delicate ones or those with a special design, the shop gives you a single price for the piece. That is fine, but divide the amount by the weight of the piece to find the real making charge per gram, then compare it with other offers. A total making charge can look small and still be high per gram if the piece is light.

Why does the making charge differ from piece to piece?

• Method of manufacture: Fine handwork usually costs more than machine-made pieces produced in large quantities.
• Origin and brand: Imported pieces or pieces from a well-known brand usually carry a higher making charge.
• Weight: On light pieces such as thin rings and delicate chains, the making charge per gram is usually higher, because the effort of making them does not fall as much as the weight does.
• Detail: Engraving, openwork and stone setting add to the price of the workmanship.
• Type of product: For bars and gold coins, the amount added over the gold value is much smaller than for intricate jewellery.
• Shop and area: Costs and margins vary between large and small shops and from one area to another.

What does the making charge include, and what should you ask?

The making charge is not just the craftsman's pay. It usually covers several things at once, and you have the right to understand them before you pay:

• Manufacturing, polishing, finishing and engraving.
• The cost of the design and mould, which is higher for special or exclusive designs.
• The shop's expenses: rent, staff, insurance and storage.
• The shop's profit margin.

Once you know this, you realise that the making charge is not a fixed number imposed on you, but a commercial price that both sides agree on. There is nothing wrong with asking: how much is the making charge per gram? Is it the same if I buy more than one piece? Does it change if I pay in cash?

Tax on the making charge

Tax rules differ from country to country. In some countries tax is calculated on the making charge alone, in others on the full value of the piece, and investment bars may be treated differently. So ask the seller clearly: does the price include tax? And which part was it applied to? Ask for it to be written on the invoice so you are not surprised by the total.

A worked example

For illustration only, suppose the price of a gram of 21K is 4,000 pounds, you want a bracelet weighing 10 grams, the shop asks for 250 pounds making charge per gram, and in this hypothetical example tax applies to the making charge only, at 10%. That rate is for the arithmetic only and is not an official rate.

If you resold the bracelet a week later at the same gold value (a simplification, since many shops buy at slightly below their selling price), you would get about 40,000 pounds. That means roughly 2,750 pounds, or about 6.4% of what you paid, would not come back to you. That is the price of the workmanship and the shape.

If you managed to bring the making charge down to 200 pounds per gram, the making charge would be 2,000 and the tax 200, for a total of 42,200 pounds, meaning you saved 550 pounds. You can easily try your own numbers with the gold calculator.

How to negotiate the making charge

1. Ask for the making charge separately from the gold price before you ask for the total, so each item shows up on its own.
2. Convert every offer into a making charge per gram so you can compare offers fairly.
3. Compare two or three shops for a similar piece; simply letting the seller know you are comparing opens room to negotiate.
4. Choose simpler designs if your aim is to reduce the making charge; it is usually lower on simple machine-made pieces.
5. Buy more than one piece from the same shop if you need to anyway; a larger purchase usually gives you more room to negotiate.
6. Have the piece weighed in front of you and check the karat and hallmark before agreeing the final price. In Egypt, the Assay and Scales Authority (مصلحة الدمغة والموازين) hallmarks gold items.
7. Ask for a detailed invoice that states the weight, karat, price per gram, making charge and tax, if any.

Remember that negotiating should never come at the expense of the karat or the weight. A price that is far lower than other shops calls for caution, not celebration.

Making charges and resale

When you sell an old piece, the shop usually pays you for the net weight of gold and its karat, and does not give back what you paid for workmanship and design. If your main purpose in buying is to own gold itself, every pound you save on the making charge turns into more actual gold. If the piece is for adornment, a gift or an occasion, the making charge is an acceptable part of the price of beauty and design. To learn how to sell better later, read how to sell your used gold at the best price.

A quick checklist before you pay

• Do you know today's price per gram for the karat, and the value of the gold alone in the piece?
• Do you know the making charge per gram, not just the total?
• Have you compared at least two other offers?
• Was the piece weighed in front of you, and have you checked the karat and hallmark?
• Is tax clearly stated, and is the price inclusive or exclusive?
• Does the invoice include the weight, karat, making charge and tax?

The prices and figures in this article are indicative and for illustration only. Gold prices and making charges vary from one shop to another and from one time to another.