How do Indian physical gold shops decide daily gold prices? Is it based on global Forex gold or something else?

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I’m genuinely confused about how gold prices are calculated in Indian physical gold stores and hoping someone knowledgeable can explain this clearly.

Here’s where my confusion starts:

Globally, gold is quoted as XAU/USD, which is USD per troy ounce (31.1 grams)

In India, jewellery shops show prices as ₹ per gram

Every morning, gold prices change in shops — sometimes even without much visible movement in global gold

So my questions are:

Do Indian gold shops directly follow global Forex gold prices (XAU/USD)?

Or do they follow MCX gold prices instead?

How does the conversion actually happen?

Is it something like:

Global gold price (USD/oz)

→ Convert to INR using USD/INR rate

→ Convert ounce to grams

→ Add import duty, GST, making margin, etc.?

Who decides the “base price” for the day in India?

Is it MCX?

IBJA (Indian Bullion and Jewellers Association)?

Large bullion dealers?

Why do physical store prices differ slightly from city to city or shop to shop, even on the same day?

Also, when global gold moves at night (US market), how is that reflected in Indian shop prices the next morning?

I’m not asking from an investment angle — I just want to understand the price discovery logic behind physical gold in India.

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Hi @Arun_Anjeneyah

Interesting question. From what I have seen on the ground, most sarafa / zaveri bazaar traders keep a close eye on MCX and COMEX prices. Many bullion dealers and even some jewellers trade or hedge on MCX, so they are always aware of real-time futures prices.

But physical gold is not priced directly from futures. MCX is mainly used as a reference to understand direction and market sentiment. The actual spot price in the physical market depends more on local demand and supply, what price the dealer has bought gold at, and the premium being charged by wholesalers.

MCX itself broadly follows COMEX trends, adjusted for USD/INR and Indian factors like duties and liquidity. IBJA publishes a daily reference rate, but it does not decide or control prices. It is more of an indicative benchmark based on quotes from large dealers.

Price differences across cities or even shops on the same day happen because of transport costs, local demand, dealer margins, purity differences (995 vs 999vs 9999) and more. When global gold moves overnight in the US market, it usually shows up the next morning when MCX opens. Based on that, bullion dealers update their quotes, and jewellers revise prices for the day.

So my understanding is , Indian physical gold pricing is a mix of global markets, MCX prices, and local physical market demand-supply. There is no single fixed formula that everyone follows.

Would love to hear from this community how actually physical market dealers price their bullion goods??
@JayG @Swapnil_Munot @t7support @pavz @dazzler263 @Goal_Archiver @Shally your thoughts??

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The Indian Bullion and Jewellers Association (IBJA) publishes the benchmark or base price of gold in India for both 24K (999) and 22K (916) purity. These prices are published twice daily and serve as the reference for most of the Indian jewellery trade.

The IBJA price is derived from a combination of:

  • The LBMA (London Bullion Market Association) gold price, where global gold price discovery occurs

  • The prevailing USD/INR exchange rate

  • Import-related costs, including customs duty and taxes

  • Quotes from large domestic bullion dealers

Most jewellers across India use the IBJA benchmark as the starting point for daily pricing. Final retail prices can vary by city or individual shop due to factors such as transportation and insurance costs, local market liquidity, demand–supply imbalances, inventory carrying costs, and individual margin policies.

MCX Gold, on the other hand, does not represent spot physical gold. It is a rupee-denominated futures contract for standardized delivery, primarily used by traders, hedgers, and large jewellers for price risk management. MCX prices therefore reflect the market’s expectation of the future landed cost of gold in India, rather than the current LBMA spot price.

As a result, retail gold pricing in India does not reference MCX directly. Instead, MCX acts as a risk-management and price-expectation mechanism, while IBJA remains the primary reference for physical gold pricing in the domestic market.

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LBMA - AM/PM, lets take price on 22-Jan -PM $4832.05 (.9995 fine ounces), USDINR 91.86, Duty 6%, Troy Ounce to Grams - 31.1034768. Now do the calculation

4832.05/31.1034768= 155.35, 155.35x91.86= 14270.82 add 6% duty and you will get 15127.07/- is the base price in London. Now, India is a net importer of Gold so add transportation and safety approx. 2 to 3 percent which IBJ will add and show the same on their site every day.

Jewellery shops later add their expense like rent, salary and profit, ++tax (so called making charges) to the product and tell you the price. This margin you can find out by asking a price of raw 10gm of gold piece and 10gm a made ring.

MCX is future prices.

Lets, assume I am a Jewellery shop and I purchased 1kg gold back in 2024, (I wish I did) and if you come to me today and ask for 1gm of gold I would sell you above 15127.07/-. As later when I have to replace the same 1 gm I will be paying today’s prices.

One can never guess the exact price because of human nature but rest assure they will never sell you below 15127.07/- or IBJ rates. Don’t run after trying to guessing the price until you want to enter in to the business to Jewellery. Often Jewellery store owners also have a WhatsApp group where they decide what price they want to sell today.

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