The soaring gold prices have led to a surge in customers selling their old jewellery and coins, causing displays in jewellery stores across Asia and the Middle East to lose their shine. This trend could potentially lead to lower imports into major markets, which may dampen the current rally in gold prices, according to retailers and industry experts.
Spot gold prices reached over $3,000 an ounce for the first time on March 14, with year-to-date gains of more than 15% fueled by political and financial uncertainty. The rally in gold prices has prompted an increase in business for scrap gold buyers in India’s Zaveri Bazaar, the country’s largest bullion market.
One textile trader, Unmesh Patel, shared his experience of selling four 10-gram gold coins for a return of over 25% after the Indian government reduced import duties on gold. Domestic gold prices in India have surged over 32% since the duty cut in July, reaching a record high of 89,796 rupees per 10 grams.
The high prices have impacted consumer behavior, with fewer people making new purchases and instead opting to sell their old jewellery or coins. This has been particularly notable during India’s wedding season, where even the bride-to-be, Vaishnavi M., plans to exchange her mother’s old jewellery to save on costs.
Industry experts predict that if prices remain high throughout the year, India’s overall demand for gold could drop by more than 30% in 2025. Similarly, jewellery hubs in the Middle East are also experiencing a decline in demand, with even Indian tourists holding back on purchases.
The lackluster demand for gold jewellery is a common trend across major Asian markets, where consumers are either choosing cheaper options or selling their existing gold. The outlook for jewellery demand remains gloomy, while investment demand for bullion is expected to remain strong.
Despite the challenges faced by the jewellery industry, the delicate balance between gold’s cultural significance and its financial value remains evident. The future trajectory of gold prices and demand for jewellery will continue to be influenced by various economic factors in the coming months.