Understanding How Gold Jewelry Is Sold In Thailand

[jsflynn603]

There have been threads on “how and where to buy gold” recently, and many people get confused and some get literally frightened by the Thai jewelry stores and I think that’s understandable as jewelry is sold differently here than in some other countries. I wrote this hoping that it would be useful and that some might get a bit more insight to buying gold jewelry:Yesterday I purchased a gold chain for my girlfriend.

Though I’m an RN (Registered Nurse) these days, for most of my adult life I was a goldsmith/jewelry designer/manufacturer, I know the jewelry trade.

Thailand offers tremendous bargains. As a matter of fact (speaking of Chiangmai) everything is a bargain including food, lodging, transportation and genuine smiles come for free. One bargain that most do not understand is gold jewelry, and here is an analysis of my purchase.

The price of gold jewelry in Thailand is absolutely wonderful; not withstanding that gold is near an all-time high. In Thailand almost all gold jewelry is .965/1.000, or 96.5% pure gold, the balance being a blend of copper and/or silver and/or zinc and/or manganese (pure gold is too soft to use to make jewelry, the alloying metal hardens it). Thai gold is often referred to as 23 ½ karat, but this is really not true, it is actually about 23.2 karat. Variability in the content of gold in America is, by law, required to assay to within .05 karat, I don’t know about the variability of gold (how close a piece of jewelry sold as .965 actually comes to being true .965 content) in Thailand, but I suspect it usually is very close, just as it is in America, though highly decorative items that contain fused enamel, or gemstones will obviously be “off.”

Note: In malls in Chiangmai, some jewelry is 14kt which is the typical “American standard (some “high-end” US jewelry is 18kt or .750 gold (75% pure gold) but I have not seen any 18kt gold here in Thailand.). What is “karat?” = (there are 24 karat(s) in pure gold thus 14kt/24kt = .585, thus 58.5% of the item of jewelry is gold and the remaining 41.5% is an “alloying metal” such as copper/silver/zinc, etc. At all the Chinese gold jewelry stores that I visited at Wororot Market (on the West side of the Ping River, South of Narawat Bridge) in Chiang Mai, all only sold the .965 (96.5% pure gold in the item) gold.

All the shops that I visited at Wororot Market sold jewelry by the same formula which is weight + fabrication fee. Each item has a paper tag and there are two numbers, one represents the weight, usually in grams (occasionally the weight is listed as “Baht.” Note: 1 baht = 15.16 grams of pure gold, though in fabricated form 1 Baht of pure gold within the fabricated item would weigh 15.22 grams, the difference being the alloying metals) and the other item on the tag is the cost to “make the item.”

So when asking for a price one must ask for the price "including" the manufacturing cost.

But how do I know if the item weighs as much as is stated? Good question and here is the answer:

Bring one or two coins of known weight with you. An American quarter (quarter dollar, also known as a 25 cent piece) is remarkably consistent in weight at 5.67grams. At each store I asked to see the weight on a gram scale of both the item and also the US quarter. The variability on the quarter was 5.2 to 5.7 between three stores. This means that two stores were very precise, but one store was off by almost one half gram and this (especially on a lightweight item) is a big difference. I found this confusing as if a scale reads low on the weight of the quarter, then the true weight is about 0.5 grams higher. Were a store trying to deceive the weight of the quarter would show more than its true weight so this discrepancy did not show any attempt to deceive. At any rate, look up the exact weight of a common coin of your currency and you can use this to make sure that the quoted weight of the item is precise relative to the coin of known weight. None of the shops seemed to mind. One salesperson was confused; the other two knew exactly what I was doing.

The necklace that I purchased just happened to weigh “1 Baht” or as the tag showed: 15.2 grams. Seeing 15.2 grams on the gram scale and seeing the quarter weighing in at about half a gram lighter than it should be I must wonder if this store needs a new scale, and that I was undercharged by ½ gram. At any rate for my calculations I have ignored this discrepancy because if it exists, it is in my favor.

The necklace I purchased weighed 15.2 grams (possibly ~0.5g more).

15.2 grams x .965 = 14.7 grams of pure gold content; now we know the pure gold content in the necklace.

At the time of purchase gold was priced internationally at just about $1380US/troy ounce. Gold is always sold in Troy ounces, and there are 31.103 grams in a Troy ounce. Therefore pure gold at the world market price was $1380/31.103 or $44.37 per gram. See kitco.com or other websites for up to the minute gold price. Note: This is the price for wholesale transactions, generally the cheapest you can buy pure (99.99%) in any form will cost you about 2% more, plus postage to send it to you.

Therefore since my necklace contained the equivalent of 14.7 grams pure gold at the current wholesale price of gold we have 14.7 x $44.37 = $652.22.

Thus if I were buying a thousand ounce bar of gold I would be paying the $44.37/gram. In reality I would have to pay about $US45.26 per gram because of the ~2% extra that I must pay to buy the gold (the dealer must make something) plus postage (about $25US for one ounce).

In my calculations I’ll use both the “international wholesale price of $44.37/gram,” and also the cost that I could have purchased the cheapest one ounce bar/ingot from Kitco, ignoring the postage to get it which is $45.26/gram. 14.7 x 45.26 = $665.32

I paid in total, 20,400 Baht for the necklace. The international exchange rate at the time of purchase was about 30.6 Baht

For US$ versus Baht price see:

http://finance.yahoo.com/echarts?s=THB=X+Interactive#symbol=THB=X;range=5d

My debit card sold me Baht at US$1 = 30.5 Baht, my credit union rebates all ATM fees including the 150 Baht bank fee. Therefore 22,400 Baht / 30.5 = $734.42 (My exact cost for the necklace in US$).

Therefore the necklace cost US$82.20 more than the international current wholesale value of the gold in it. $734.42 - $652.22 = $82.20

Since I cannot ever achieve the international current wholesale value and must pay at least a 2% premium I’ll calculate comparing cost to what I’d really have to pay (ignoring postage) to get pure gold which is the aforementioned $665.32. This, I think makes the best comparative value since it is really what I would have paid to obtain gold at the same time I purchased the necklace.

Therefore the necklace cost US$69.10 more than what it would cost me to purchase that amount of pure gold in the US. Since postage would cost me at least $25 the real difference in buying the necklace versus that amount of pure gold is actually $44.10. I think that’s quite a deal!

The same necklace in 18kt gold in the US would probably cost me between US$1000 to US$1400 as compared to my $734.42.

In short gold jewelry in Thailand is a rather amazing “deal,” when comparing it to the US jewelry market.

Note: Americans can generally return with up to $800 in purchases with no duty upon returning. Between $800 and $2000 the duty (I think) is a flat 3%. Beyond that, I’m not sure.

Considering that almost all states in the US has a sale charge (my state of New Hampshire and Alaska being an exception) that ranges between 3-7% this can add up to a significant extra. In fact, if an 18kt necklace in America of similar weight sells for $1000US, the $70 sales tax makes buying this necklace cheaper than buying the pure gold (assuming no sales tax on the purchased gold (by buying out of state and having it mailed to you) and no duty paid upon returning to the US).

I hope that some find this analysis helpful.

[mstribling]

Really great information. Thanks.

[powderpuff]

UH as you pointed out "work" chatges are on top of the weight.

Yet you never mention that in your calculations.

Thai Gold has always been a bargain compared to other countries. AND it's just as easy to sell as it is to buy. Of course you won't get the "work" fees back.

[Kwasaki]

To be kind !!! I thought you would be torn to bits but I think they are being quiet and just not replying. :lol:

[mstribling]

To be kind !!! I thought you would be torn to bits but I think they are being quiet and just not replying. :lol:

So true

[Naam]

for most of my adult life I was a goldsmith/jewelry designer/manufacturer, I know the jewelry trade.

...pure gold is too soft to use to make jewelry, the alloying metal hardens it...

that proves that you are American and have never been exposed to pure gold jewelry. but... take it easy my friend, no offence meant! in this forum i am well known to point out "flaws".

:jap:

[jsflynn603]

It was difficult, in the end to sort of the gold price versus the "fabrication fee." Originally the quote was 20,200 for the gold and 500 for the fee, but a bit of very light mention of a discount reduced it overall from 20,700 to 20,400,' reducing the total by 300 baht. It didn't seem important to me as to where it came "off."

As far as never being exposed to 24kt, or 23kt jewelry, Naam's comment is generally true, for most American people and unquestionably Asian gold products, as related to gold content is the best in the world. I would add though that at one time I made and sold jewelry that was 99.8% pure gold, and the balance was aluminum. When mixed together the gold turns lavender, and is often called "purple gold." It is a non-malleable metal though, and quite brittle and so must be inlaid, which I inlaid into titanium, tantalum or niobium, machine turned rings. Though I have no photos of my work here in CM, you can search google for "purple gold." A nice image of an inlaid piece can be seen at: http://www.webexhibi...sofcolor/9.html

Powderpuff's comments also are quite true, but while in America one might get (if lucky) a 70% return on the value of the contained gold, relative to international wholesale price (London PM fix really is not used much anymore, due to volatility. I suspect that were I return the necklace today to a different gold seller, yes, I'd lose the fabrication fee, and a few percentage of the gold value, but I'd suspect that I'd achieve closer to a 90+% return on gold value. Therefore I believe buying Asian gold comes closer to owning jewelry as "intrinsic wealth," something that jewelry in America generally does not do.

Thai,Chinese, Vietnamese, Indians (others too) have held onto the concept as gold has intrinsic value. Fiat currencies come and go, and while gold has little "function," the Asians, Indians, and other wise people realize that no matter what gold, if nothing else, acts as an insurance policy. Politicians can debase currencies as we are seeing throughout the world simply by turning up the printing press (or entering digits into a computer) but not one can create an extra ounce of gold unless it is dug out of the ground. (Excluding transmutation in a nuclear reactor which can be done, but is not economical).

There, now there is ample fodder for the "tear to pieces" crowd...hehee...

[afarang]

On the front window or door of every Thai gold shop, will be written that days Buying and Selling price.For many Thai ladies, gold is insurance. Which is why ,generally, The first thing they want from you is gold. When or if ,the relationship founders, it is off to the gold shop ,and get instant cash

[whitethai]

I doubt it is possible to make proit then with thai gold in UK?

As of this post I sold a 22 carat 5 gram ring for £120

Can you post gold to UK? I suspect there will be taxes?

[gregb]

Considering that almost all states in the US has a sale charge (my state of New Hampshire and Alaska being an exception) that ranges between 3-7% this can add up to a significant extra.

I am unaware of any state in the USA with a sales tax that does not also require you to pay use tax if you bring an item in from out of state that was not left out of state for a period of time. Usually 1 year.

The fact that you are failing to pay your taxes on imports from Thailand is fine, but you can hardly use this as a basis to claim Thai gold is cheaper. Based on that faulty logic, simply stealing the chains would be even a better deal. In both cases, you are committing a crime. It is only a matter of degree.

And don't be surprised if one day those customs forms you filled out are turned over to your state of residence so they can come after you for unpaid use taxes. California is notorious for going after aircraft owners who fail to pay use taxes on planes purchased out of state, and several months back they made an announcement saying they were considering expanding this program to bring even more items under their discerning eye.

Thai gold has many advantages over the jewelry sold in the states, but advertising that cheating on your state taxes is a viable reason for buying it would seem foolish. Do it if you want, but keep it quiet.

[whitethai]

The way I calculate 1 Baht its double a UK trader or shop would pay withconversion rates from US dollar to UK pounds and thats not import tax whatever

[tw25rw]

I will be in the market to buy gold on my next trip, so this has been very helpful.. Thanks.