How Gold Price Is Set in India

Step 1: The International Spot Price (London Bullion Market)

Gold is priced globally in US Dollars per troy ounce (1 troy oz = 31.1 grams). The benchmark is set twice daily by the London Bullion Market Association (LBMA) — known as the "Gold Fix." As of May 2026, gold trades around $4,600–$4,800 per troy ounce.

This international price is driven by global factors: US Federal Reserve interest rate decisions, the strength of the US Dollar, geopolitical tensions, central bank gold purchases (India's RBI is a major buyer), and investor demand through ETFs and futures markets.

Step 2: Converting to Indian Rupees

The dollar price is converted to INR using the USD/INR exchange rate. If gold is $4,700/troy oz and the dollar is at ₹95, the base price becomes:

This is why a weakening rupee automatically makes gold more expensive in India, even if the international price stays flat. When the rupee fell from ₹83 to ₹95 in 2025–26, it added roughly ₹1,800 per gram to the cost of gold.

Step 3: Indian Import Duties

India imports nearly all its gold (around 700–900 tonnes per year). The government levies import duties to manage the current account deficit and earn revenue. As of May 2026, the duty structure is:

• Basic Customs Duty (BCD): 6%
• Agriculture Infrastructure Development Cess (AIDC): 5%
• Social Welfare Surcharge (SWS): 0.6% (10% of BCD)

Total import duty adds roughly 11.6% to the base price. On our ₹14,373/gram base, this becomes approximately ₹16,043/gram.

Why do duties change suddenly? The Union Budget (presented every February) can revise these rates. In May 2026, an emergency duty revision added further to prices. Such sudden changes cause sharp overnight spikes — exactly like what happened on May 13, 2026 when prices jumped ₹1,300+ per gram in a single day.

Step 4: GST (Goods and Services Tax)

A flat 3% GST applies to all gold purchases in India, whether from a jeweller or bank. This applies to both jewellery and gold coins/bars. On top of the duty-inclusive price, GST adds another ₹480+ per gram at current rates.

Gold jewellery also attracts an additional GST on making charges — typically 5% on the labour/crafting cost, which varies by jeweller.

Step 5: IBJA Benchmark Rate

The India Bullion and Jewellers Association (IBJA) publishes an official indicative rate twice daily — an AM rate around 11 AM and a PM rate around 5 PM IST. These rates are based on the current international spot price converted to INR after duties.

Most Indian banks, gold loan companies (Muthoot, Manappuram), and large jewellers use IBJA rates as the reference for loans, valuations, and buyback prices. DhanDaily sources its gold rates from this same benchmark.

Step 6: City Premiums and Jeweller Margin

The price you see at your local jeweller includes additional charges:

• Transport and handling: Gold moved from Mumbai port to interior cities costs more. This is why Delhi and Mumbai prices are lower than, say, Hyderabad or Kochi.
• Making charges: The jeweller's fee for crafting jewellery, ranging from ₹150 to ₹800+ per gram depending on the design complexity.
• Wastage: Some jewellers charge 3–12% wastage on the gold weight during manufacturing.
• Jeweller margin: Typically 2–5% profit margin.

This is why the same 22K gold chain costs different amounts at a small local jeweller versus a large branded chain like Tanishq or Kalyan Jewellers.

The Full Price Stack

Key Takeaways

• The rupee's weakness is as important as global gold prices for Indian buyers
• Government duty changes can cause sharp overnight price jumps
• IBJA rates are the most reliable benchmark — avoid buying from unregistered dealers
• For investment purchases, prefer BIS hallmarked 24K coins/bars with minimal making charges
• Gold ETFs and Sovereign Gold Bonds (SGBs) are cheaper alternatives to physical gold since they avoid GST and making charges