The recent spike in gold prices has negatively impacted demand for jewellery ahead of the upcoming peak festival and wedding season.
Gold prices have risen to Rs 88,354 per 10 grams from Rs 85,320 on March 3, driven by a strong rally in global markets where it has surpassed the historic $3,000 per ounce mark.
This increase in gold prices comes at a time when demand for gold jewellery typically peaks during festivals such as Gudi Padwa and Ugadi in Maharashtra, Karnataka, Andhra Pradesh and Telangana, which will be celebrated on March 30. Additionally, another auspicious occasion for gold jewellery sales, Akshay Tritiya, will be observed on April 30.
Kumar Jain, national spokesperson for the Indian Bullion and Jewellers’ Association, noted that demand for gold jewellery has significantly decreased as buyers are postponing purchases in anticipation of a potential price drop once the current geopolitical issues are resolved.
Despite the slowdown in jewellery demand, experts predict that gold prices will continue to rise in both global and domestic markets, with prices in India expected to reach Rs 1 lakh per 10 grams within the next two months.
The surge in gold prices can be attributed to the ongoing trade tension between the US and Europe, with President Donald Trump threatening to impose tariffs of up to 200 per cent on European alcoholic beverages in retaliation for the EU’s tariffs on American whiskey.
As a result of the price hike, many consumers are opting to exchange their old jewellery for new designs. Dr Saurabh Gadgil, CMD of PNG Jewellers, highlighted that during periods of high gold prices, consumers often choose to exchange old jewellery for new pieces, maintaining liquidity while continuing their purchases.
While the current inflationary trends, geopolitical uncertainties, and central bank buying may contribute to further price increases, the subdued jewellery demand could somewhat mitigate the rise in overall consumption. Experts believe that cultural and seasonal factors, such as festivals and the wedding season, could help offset the decline in demand.
Overall, while there may be a temporary reduction in jewellery demand among price-sensitive customers, the upcoming festivals and wedding season are expected to support continued consumption. Suvankar Sen, Managing Director & CEO of Senco Gold & Diamonds, expressed that the rise in gold prices has not significantly impacted jewellery purchases for weddings, although there has been a slowdown in demand for lightweight jewellery. He further noted that given global uncertainties, gold prices may experience further increases due to its safe-haven status.
