Bid-Ask Spread

Buying price, buy-back price

In India the two sides of the spread look like this. On the way in you pay the metal at the day's rate, making charges, 3% GST and the seller's margin; everything above the metal is the premium. On the way out a jeweller or dealer quotes a buy-back price, which mostly reflects the gold content at the day's rate, sometimes less a deduction.

Worked example in round rupees: a 10 g coin of 999 gold costs you 1,07,120 on a day when the rate is 1,00,000 per 10 g. That same afternoon a buyer offers 98,000. You would lose 9,120, close to 8.5% of the purchase price, so the rate has to climb by about that much before selling makes sense.

What widens the spread in India

• Making charges and GST: both are part of what you paid, while a buy-back quote is usually based on the metal. See GST on gold.
• Lower or unclear purity: a 22K item is valued at the 916 rate, and an item without a clear mark may be tested and discounted. See carat.
• Collector premiums: special designs and limited issues are often bought back closer to metal value than to the issue price. See numismatic coins.
• Selling to a different shop: buy-back terms differ between jewellers, and some treat their own products differently from other brands.

How to keep the spread small

1. Buy 24K coins and bars of known purity rather than jewellery if your aim is to hold metal.
2. Prefer hallmarked items. Every BIS-hallmarked gold piece has a HUID code that any buyer can check in the BIS CARE app, which makes the purity easy to prove.
3. Keep the invoice and the original packing.
4. Ask how a buy-back price is calculated: which day's rate, which purity, and what deductions apply.
5. Get quotes from more than one buyer, and compare entry prices in the cheapest gold coins ranking, since a lower entry price shrinks the spread you need to recover.

To value what you hold before asking for quotes, multiply its fine weight by the live gold price in INR. An offer far below that figure is a reason to ask elsewhere.