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Informist, Saturday, Mar. 22, 2025

 

By J. Navya Sruthi and Ashutosh Pati

 

MUMBAI – A surge in gold prices amid economic and geopolitical uncertainties has led to greater demand for 18-carat and lightweight jewellery in India, while demand for other types of jewellery has seen a decline, jewellers say. They expect high prices to keep overall jewellery sales subdued even during various upcoming festivals.

 

"Sales increased for lower carated jewellery by 20-25% from last year," Surendra Mehta, national secretary of the India Bullion and Jewellers Association, told Informist. Meanwhile, demand for overall gold jewellery fell at least 40% on year during Jan-Mar, he said. "During the festival week, we might see some surge in demand but overall demand is likely to be low."

 

Due to the rise in prices, gold has gone beyond the purchasing power of most consumers in India, because of which people are opting for lightweight jewellery as it suits their pockets, said Anil R. Jain, a jeweller in Mumbai's Zaveri Bazar. While the current high gold prices are likely to dampen the quantity of purchases, the sales are likely to be higher in value terms, he said.

 

"Most analysts predict gold prices to go up to $3,200 per ounce, and sales will happen at this rate too," Mehta said. "But the market has to settle, currently the market has an uncertainty. Everyday, there is a rise of INR 500-INR 1,000 (per 10 gm) in Indian markets. If this rally ends and price stabilises, we can see demand."

 

Currently, gold prices are hitting news highs everyday due to safe-haven demand, and are up over 14% since the beginning of the year. Geopolitical uncertainty around the Russia-Ukraine conflict, the war in West Asia, and more recently the trade policies of US President Donald Trump have lifted safe-haven demand for gold, as other investment avenues have lost much of their appeal.

 

On Thursday, the most-active April gold contract on the Multi Commodity Exchange of India hit an all-time high of INR 89,796 per 10 grams and the same-month contract on COMEX hit an all-time high of $3,065.2 per ounce.

 

The surge in gold prices has hit demand for gold jewellery in the country and purchases have been restricted to need-based buying, primarily for weddings, World Gold Council Research Head (India) Kavita Chacko said in a report. Consumers are waiting on the sidelines, hoping for a correction in prices or signs of price stability, she said.

 

"Majority of the investment is going into (gold) bars and coins as the share market has tanked and people think gold prices do not fall but keep rising over a period," Jain said. "Common people have shifted investment avenues from equities to bullion so that they can encash it anywhere and anytime. However, people are not much aware about digital gold and only high net worth investors are going for digital ones," he added. 

 

LEASE RATES

Concern about a global trade war has prompted global banks to rush to secure the yellow metal, leading to a rise in bank lease rates globally to as high as 5% in January. "The lease rates seem to be cooling down, with data suggesting it is now closer to 1% and well below January's record high," WGC said in a report.

 

In India, the interest rate on gold metal loans has risen to 6.5-7% from 3.5?rlier, Mehta said. However, analysts and market participants said there was no shortage of gold bars in India, and the rise in lease rates is due to geopolitical tensions globally. 

 

"There is no crunch of gold bars in India, the demand for gold metal loans has gone up and the lease rates rose due to the international scenario," Mehta said. But not many people are opting for gold metal loans and most jewellers are not affected by this, he added. 

 

Amid the threat of US tariffs under the Trump administration, gold reserves with Bank of England have depleted 2% as traders are shifting gold from London to New York, analysts said. Demand for gold is "humongous", Ajay Kedia, director of Kedia Advisory, said, adding that there was a shortage of the precious metal in international markets.  End

 

US$1 = INR 85.97

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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