High gold prices boost exchange schemes: What customers must know

India's gold recycling market is expanding rapidly as rising prices push households to exchange old jewellery, but customers must watch for purity checks, deductions and opaque valuation practices

Large jewellery retailers are promoting gold-exchange schemes. According to the World Gold Council’s (WGC’s) Gold Demand Trends report, India’s net recycling or scrap supply rose 20 per cent year-on-year and 44 per cent quarter-on-quarter to 31.2 tonnes in the first quarter of 2026. For households holding idle jewellery, the rise in gold prices has made exchange more attractive. But customers must understand how valuation works before handing over old ornaments.

 

Why is gold recycling gaining momentum?

 

Recycling has always been a part of the jewellery industry. “Customers exchange ornaments they are bored with, or pieces damaged by wear and tear. Exchange volumes have risen sharply in recent times because of high gold prices,” says Sangeeta Chetan, director, Zaveri Bros Diamonds & Gold.

 

“The sharp rise in gold prices, higher import duties and the focus on reducing import dependence are accelerating old-gold exchange and recycling,” says Suvankar Sen, chief executive officer (CEO) and managing director (MD), Senco Gold and Diamonds.

 

Greater formalisation of the jewellery market has accelerated this trend. “Transparent exchange programmes by organised retailers are increasing trust in gold-exchange schemes,” says Shubham Gupta, co-founder, Growthvine Capital.

 

How does a gold exchange work?

 

The customer brings old jewellery to the store. The jeweller first assesses purity using methods such as X-ray fluorescence (XRF) testing or melting tests. The jewellery is then weighed after removing stones, enamel, pearls and other non-gold elements.

 

“After purity and net weight are established, the prevailing gold rate is applied after adjusting for impurities, stones, wastage or making charges,” says Gupta. The jeweller adjusts the final amount against a new jewellery purchase or issues store credit.

 

Watch out for value erosion

 

Exchanging old jewellery involves significant value destruction. “Customers do not recover the original making charges paid on old jewellery. Sentimental value is also lost when heirloom pieces are exchanged or melted,” says Sen.

 

Disputes may arise over purity assessment and deductions, especially if the jeweller finds the jewellery to be of lower caratage than expected.

 

How should customers verify purity and rates?

 

Before entering into an exchange transaction, customers should know the purity of their old jewellery. Chetan says customers should know whether the purity is 916 (22 carat), 750 (18 carat) or 585 (14 carat).

 

Customers should exchange gold only with reputed and organised jewellers that use transparent testing methods. “Insist on purity testing in your presence through methods such as X-ray fluorescence (XRF) testing,” says Sen.

 

XRF is a transparent, non-destructive testing method. Customers should observe the testing process and ask for a written breakdown of purity, net gold content and deductions. If one retailer reports materially lower purity than others, seek further verification before proceeding.

 

Should you get an independent assessment done?

 

Customers can also get their jewellery independently assessed before opting for an exchange. “Bureau of Indian Standards (BIS)-authorised assaying and hallmarking centres test purity and weight for ₹35 to ₹200 per article,” says Saurabh Bansal, founder, Finatwork Investment.

 

Private laboratories also offer XRF testing. “An independent certificate allows customers to approach multiple jewellers, compare rates, and negotiate with more information,” says Bansal.

 

What deductions do jewellers make?

 

Jewellers make deductions for stones, pearls, enamel and other non-gold elements, including wax weight, if any, attached to the jewellery. “The most important deduction is for purity if the jeweller finds the jewellery to be of lower caratage than expected,” says Sen.

 

Jewellers may also account for melting or refining losses, especially if the ornament is old, heavily designed, or difficult to process.

 

Why should stones not be bundled with scrap gold?

 

Stones, diamonds, meenakari work, beads and mixed metals are rarely valued fairly in old-gold exchange.

 

“The standard practice is to value only the gold weight and ignore stones entirely, or offer only a nominal amount for them,” says Bansal.

 

Separate all stones before exchanging jewellery. “Diamonds should be assessed by a gemmologist and sold separately. Coloured stones have an independent resale market. They should be taken to a gem testing laboratory first. Polki, coral and pearls carry their own value and should not be bundled into scrap gold pricing,” says Bansal.

 

How can customers check the gold rate properly?

 

Compare the jeweller’s rate with the prevailing market rate for gold on that day. “Track the prevailing 24-carat market gold rate, typically quoted through Multi Commodity Exchange (MCX) prices or leading bullion associations,” says Gupta. Since most jewellery in India is 22 carat, the exchange value will be adjusted lower based on purity.

 

Customers should evaluate the overall transaction value, not just the headline exchange rate. “Some retailers may offer a higher headline exchange rate but compensate through elevated making charges on the new purchase,” says Gupta.

 

Why should customers avoid opaque transactions?

 

Most small jewellers use the touchstone or acid method to assess purity. “This is far less accurate than X-ray fluorescence testing,” says Bansal. A 22-carat piece could be assessed as 18 carat, reducing the value paid by roughly 18 per cent.

 

The weighing scale also matters. “Scales without a Legal Metrology stamp cannot be verified,” says Bansal.

 

Jewellers often apply deductions for melting loss or handling arbitrarily and may not itemise them. Off-the-books transactions also leave no goods and services tax (GST) trail or scope for formal grievance redressal.

Insist on proper documents

• Written receipt must have customer details, date and item description
• Gross weight, net gold weight and declared purity should be recorded
• All deductions should be itemised separately
• Melting loss and making charges should be shown as separate line items
• Rate per gram should be linked to a benchmark such as MCX or IBJA
• Shop’s GST identification number should be included
• Get purchase invoice with HUID number for new jewellery