How are the benchmark prices for gold in India fixed? The truth is that there is no commonly accepted benchmark. Given that there is no physical market where gold is bought and sold, participants still rely on informal gold price quotes disseminated by the jewellery trade.

The gold imported into the country is brought in through the nominated agencies, mainly banks. Banks supply this gold to bullion dealers, at a price that includes customs duty after adding a fee to it. The IBJA- Indian Bullion Jewellers Association, a Mumbai-based association of gold dealers, then announces a rupee price for gold every day based on quotes from its member dealers.

These dealers base their quotes on how much gold they would like to buy or sell at a given price. Ketan Shroff, the spokesperson for IBJA, explains- “For the opening and closing rates we provide, we call up ten large dealers and take ‘buy’, ‘sell’ quotes from them. We then average it out to arrive at the price for the day”. This is the daily gold rate (after adjusting for state taxes) that retail buyers usually pay when they purchase jewellery at outlets in their city.

Some gold dealers arrive at the day’s spot price using the near-month gold futures contract on the MCX. Others arrive at the calculation thus. They take the international price of gold, multiply it by the rupee/dollar exchange rate and add the import duty (10 per cent) and other levies such as VAT and Octroi to arrive at the landed price for gold. To this they add the premium that the importing bank demands and also their own profit margin.