Thermodynamics of Gold: Understanding Hidden Costs in Jewellery

Gold prices are soaring—again! Headlines scream predictions of gold touching $4000 per ounce (that’s around ₹12,000 per gram!). But is this just a spike, or is gold destined to rise forever like the entropy of the universe? Let’s break it down.

A Shiny Analogy: Steel vs Gold

Imagine this: you spot a sleek, stainless steel hanging shelf for your kitchen. It’s shiny, sturdy, and costs ₹5000 for 10 kg—₹500 per kg. You buy it, love it, and use it for three years. But now, you're done with it. Maybe it’s lost its shine, or you just need more space.

You return to the shop. Steel prices have gone up to ₹550 per kg. That means your 10 kg shelf should be worth ₹5500, right? You eye a new, bigger 20 kg shelf priced at ₹11,000. Simple math: trade in the old shelf, pay the ₹5500 difference, and you’re good.

Well… not so fast.

The shopkeeper isn’t offering ₹5500. You’d be lucky if he gives you half of what you paid! Why? Two reasons:

1. Stainless ≠ Timeless – That shiny finish dulls over time.
   
   

2. Style is fleeting – Your old shelf design may no longer be in demand.
   
   

To reuse the steel, the shopkeeper must either find a buyer who wants exactly that shelf, or melt it down and reshape it—a costly process unless done on a massive scale.

Now Enter Gold: The Timeless Metal

Gold, however, plays by different rules. Don’t like your old jewellery design? Want to upgrade to something heavier or trendier? Walk into a jewellery shop and they’ll melt your old gold and reshape it into whatever you want. Simple. Efficient.

Why? Because:

• Gold doesn’t lose its shine or value easily.
  
  

• It’s much easier to recycle and reuse—even on a small scale.
  
  

• Jewellers are equipped to remold gold quickly without major industrial processes.
  
  

From a thermodynamics point of view, gold is beautifully reversible—ornaments can become bars, and bars can become new ornaments, without much loss in value.

So, Why Is Gold So Expensive?

Gold prices are driven, like any commodity, by demand and supply. But gold is special. It's seen as a universal currency. No matter where you are on the planet, gold retains its value. That makes it a favorite—not just for families or collectors, but for big investors too.

The “Safe Haven” Factor

When times get tough—wars, pandemics, economic uncertainty—fund houses and large investors rush toward gold. Why? Because when businesses become risky, gold remains safe. It's the equivalent of curling up with a warm blanket during a thunderstorm.

So the more chaos in the world, the more demand for gold—and up goes the price.

But Will It Ever Come Down?

Now that’s a tricky one.

Even if global peace returns and markets stabilize, gold prices might not crash. Why? Because the price you paid for gold includes more than just the raw material.

Take jewellery for example—you’re not just paying for the gold itself, but also for making charges, design fees, and taxes. These are non-refundable and represent irreversible costs, much like energy lost in an irreversible thermodynamic process. Once paid, they cannot be recovered. So, when you return the gold, the merchant only values the pure gold content, not the craftsmanship or other add-ons. Even if the market price dips or rises, you’ll never fully recover what you originally paid—because part of that value has already been "dissipated" into the system, never to return.

Final Thoughts: Is Gold Still Worth It?

Absolutely. Despite the charges and market quirks, gold remains one of the few materials that you can sell almost anywhere in the world and still fetch close to its current market price.

Whether it hits ₹12,000 per gram or not, gold will always glitter—for those who know how to value it right.

So, the next time you buy or sell gold, think beyond the glitter. Consider the irreversible costs, the thermodynamic parallels, and the real value you retain.

But what do you think?

• Do you see gold as a smart investment or just a cultural tradition?

• Have you ever tried selling old jewellery—were you surprised by how little you got back?

• Should jewellers make making charges more transparent, or even refundable?

• And finally, can understanding concepts like irreversibility help us make better financial decisions?

I'd love to hear your thoughts!