A customer asks, “How much is this ring?” and the sales assistant answers with a single number. Behind that number, though, is a fixed formula: the piece’s weight, today’s gram price for its karat, the making charge, and then any discount and tax. This guide explains how to calculate the price of gold with the making charge step by step, from the ounce price to the final figure on the invoice, with a worked example.
The formula in one line
Price of the piece = weight × (karat gram price + making charge per gram) − discount + tax
- Weight: the piece’s weight in grams, as on the scale and the tag.
- Karat gram price: today’s price for a gram of pure gold, multiplied by the karat’s ratio.
- Making charge per gram: the fee for crafting and design, including the shop’s profit.
- Discount: if you give one, it is deducted before tax.
- Tax: where your country levies it, it is calculated on the amount after the discount.
The gram price and its making charge added together are what customers call “the price of a gram of gold with the making charge”.
From the ounce price to the karat gram price
Gold is quoted worldwide in US dollars per ounce, and an ounce of gold is 31.1035 grams. So the price of a gram of pure gold in your currency is:
24K gram price = ounce price in dollars × dollar exchange rate ÷ 31.1035
A hypothetical example: an ounce at 3,317.60 dollars and a dollar at 3.75 riyals give a 24K gram of 3,317.60 × 3.75 ÷ 31.1035 ≈ 400 riyals. Each karat’s price then follows from its ratio to 24:
Karat gram price = 24K gram price × karat ÷ 24
| Karat | Purity (per 1,000) | Ratio | Gram price if 24K = 400 |
|---|---|---|---|
| 24 | 999.9 | 24 ÷ 24 | 400.00 |
| 22 | 916 | 22 ÷ 24 | 366.67 |
| 21 | 875 | 21 ÷ 24 | 350.00 |
| 18 | 750 | 18 ÷ 24 | 300.00 |
This is the reference price of the metal. The price quoted in the local market may differ from it slightly with supply and demand, which is why each shop adopts a single daily price that all its staff sell at. Working out weights by karat is covered in How to manage gold inventory by weight and karat in your shop.
Making charge: per gram or per piece?
The making charge is the price of the craftsmanship: crafting, design and finishing, including the shop’s profit. It is priced in one of two ways:
- Per gram: a fixed amount for every gram, such as 25 riyals. This is the most common for everyday gold, because it grows with the weight.
- Per piece: a single amount for the whole piece, more common for pieces with a special design or fine workmanship.
To compare the two, convert the per-piece charge to a per-gram one: 200 riyals on a piece weighing 8.5 grams is about 23.53 riyals a gram. The making charge varies from piece to piece, so it is best recorded when you buy the piece from the supplier, so that the sales assistant does not improvise it in front of the customer. What you actually earn from the making charge is explained in Making charges in gold shops: how to know your real profit.
A worked example: a 21K ring
A ring weighing 8.5 grams, 21 karat. Today’s 21K gram price is 350 riyals, and the making charge is 25 riyals a gram. The sales assistant gave a discount of 50 riyals, and the shop applies 15% tax (for illustration only).
| Step | Calculation | Amount (riyals) |
|---|---|---|
| Value of the gold | 8.5 × 350 | 2,975.00 |
| Making charge | 8.5 × 25 | 212.50 |
| Price before discount | 2,975.00 + 212.50 | 3,187.50 |
| After discount | 3,187.50 − 50.00 | 3,137.50 |
| Tax at 15% | 3,137.50 × 0.15 | 470.63 |
| Total | 3,137.50 + 470.63 | 3,608.13 |
Note three things: the price of a gram of gold with the making charge here is 375 riyals (350 + 25). The discount was deducted before tax. And the tax was rounded to two decimal places, because the riyal has 100 halalas; the Kuwaiti or Bahraini dinar, by contrast, is rounded to three places, because it has 1,000 fils.
Discounts: from the making charge, not the gold
The value of the gold in a piece is a market price you cannot change, and your real profit is in the making charge. So:
- Treat every discount as a reduction in the making charge, not in the gold price.
- The 50-riyal discount in the example brings what you collect in making charge down from 212.50 to 162.50, and from that the making cost you paid the supplier is deducted.
- If the discount exceeds the whole making charge, you are selling the gold below today’s price.
- Set a maximum discount that every sales assistant knows, so that discounts do not become a matter of personal judgement.
Tax and rounding
The rules for VAT on gold vary from country to country: some countries levy it on the full price of the piece, some do not levy it, and high-purity investment bars may be treated differently. Check with the competent authority in your country before you settle on a method of calculation. Whatever the rate, three rules protect your invoice:
- The discount is deducted before tax, so the customer does not pay tax on an amount they did not pay.
- Every amount is rounded to your currency’s decimal places.
- The total equals the taxable amount plus the tax exactly, with no rounding difference.
How these figures appear on an invoice in both languages is explained in Gold invoices in Arabic and English: why travellers need them.
Questions to ask any vendor
- Where does the gold price in the software come from, and how often is it updated?
- Is each karat’s price calculated automatically from the 24K price?
- Does the making charge reach the sales screen from the purchase invoice, or does the sales assistant type it in every time?
- Does the software prevent selling a gram below today’s karat price?
- Can I set a maximum discount, and does its effect on profit show?
- Is tax calculated after the discount, and is the amount rounded to my currency’s decimal places?
- How are fixed-price pieces such as watches priced?
How ZMZMGold calculates the selling price
| Area | In ZMZMGold |
|---|---|
| Gold price | Updated automatically from gold price sources at short intervals, and shown for each karat at the top of the sales screen with a button to refresh it. The price of 22K, 21K and 18K = the 24K price × karat ÷ 24. |
| Branch currency | The gold price is converted into the branch’s currency at the daily exchange rate, so each branch sells in its own currency. |
| Weight and karat | Read from the barcode when it is scanned, so the sales assistant does not type them in. |
| Gram price | Today’s karat price appears automatically, and nothing lower is accepted unless management has enabled “selling below the gold price” with a maximum percentage it sets. |
| Making charge | Per gram, taken from the making-charge selling price recorded on the purchase invoice, and the sales assistant can adjust it when needed. |
| Line total | Weight × (gram price + making charge) − line discount. |
| Discount | On the line or on the invoice, before tax, within a maximum that management sets as a percentage of the sale total. Profit is calculated from the making charge after the discount, not from the value of the gold. |
| Tax | A rate for each branch with an effective date, calculated on the total after the discount and added to it; its line does not appear when tax is switched off. |
| Rounding | To the branch currency’s decimal places (two for the riyal, three for the dinar), and the total = the taxable amount + the tax, with no rounding difference. |
| Fixed price | Watches and gem-set pieces at a single price per piece, with no weight or making charge. It can be lowered, but it stays above cost. |
The sales screen is covered in detail in Cashier software for gold shops, and the full details are on the gold and jewellery shop management software page.
In short
The price of a gold piece is not a number to improvise: it is the weight multiplied by the karat gram price plus the making charge, minus the discount, plus tax where it applies. Work out the karat price from the 24K price, record the making charge at purchase, take discounts from the making charge rather than the gold, and round to your currency’s decimal places. And when the software takes care of these steps at every scan, every sales assistant gives the same number for the same piece.