Gold jewellery demand tapers as prices hit new high

The sudden surge in bullion prices has pulled down jewellery demand ahead of the peak festival and wedding season.

Gold prices have surged to Rs 88,354 per 10 grams from Rs 85,320 on March 3 in line with a sharp rally in global markets, where it has breached the historic $3,000-level an ounce.

The rally in gold price comes at a time when the demand for gold jewellery peaks during Gudi Padwa and Ugadi – the New Year in Maharashtra, Karnataka, Andhra Pradesh and Telangana, which will be celebrated on March 30. Similarly, another auspicious occasion for gold jewellery sales, Akshay Tritiya, will be celebrated on April 30.

Kumar Jain, national spokesperson, the Indian Bullion and Jewellers’ Association, said the demand for gold jewellery has dropped drastically as buyers are delaying purchases on the hope that prices will fall after the geo-political issue settles down in the near future.

However, he said gold prices would rally further, both in the global and domestic markets, with prices in India touching Rs 1 lakh per 10 gram in two months.

What’s behind the price surge

One of the key drivers behind the surge in gold prices is the trade tension between the US and Europe. US President Donald Trump has threatened to impose tariffs of up to 200 per cent on European alcoholic beverages, including wines and champagnes, in retaliation for the European Union’s decision to impose a 50 per cent levy on American whiskey. This move was seen as a response to Trump’s tariffs on imported steel and aluminium.

With gold hitting a new high, many consumers are considering exchanging their old jewellery for new designs. Dr Saurabh Gadgil, CMD, PNG Jewellers, said traditionally, when gold prices surge, there is a marked shift in the behaviour of consumers, who prefer to exchange old gold for new jewellery, keeping liquidity intact while continuing their purchases.

“With key festivals such as Gudi Padwa and Akshay Tritiya approaching, along with an intense wedding season, we hope demand will remain strong, as gold buying in India is sentiment-driven, rather than purely price-sensitive,” he added.

Prithviraj Kothari, Managing Director, RiddiSiddhi Bullions said the jump in gold prices, could reduce jewellery demand, especially among price-sensitive customers in the near term, but strong cultural and seasonal factors such as festivals and the wedding season could cushion the fall in demand a bit.

While on the one side ongoing inflationary trends, geopolitical uncertainties and robust central bank buying can pave the path for a further price rise, suppressed jewellery demand impacting overall consumption could temper the rise, he said.

Suvankar Sen, Managing Director & CEO, Senco Gold & Diamonds, said the gold price rise has not affected jewellery purchases for weddings, but there has been a slowdown in demand for light weight jewellery. Given global uncertainties, gold prices may go up further due to its safe haven status.