Record high gold prices take sheen off jewellery sales

Mumbai, Oct 22 (PTI) Jewellers and retailers in India expect demand to stay muted and volumes to decline this Dhanteras despite lower customs duty as the price of the yellow metal has hit record-high levels ahead of Diwali festivities.

Gold price is currently hovering around Rs 80,000 per 10 grams, while silver prices have crossed Rs 1,00,000 per kg in the national capital.

Senco Gold and Diamonds Managing Director and Chief Executive Officer Suvankar Sen said in terms of sales, the volumes will take a hit following the rising price.

"So, in terms of quantity to be sold, compared to last Dhanteras, minimum 10-12 per cent degrowth in volumes will happen, but because the prices have gone up so much. Maybe we will end up having about 12-15 per cent growth in terms of value," he added.

This time with the global uncertainties, the gold price has grown up a little too fast in a short period of time. prices are at all-time highs both domestically and internationally.

Despite a duty cut that came as a relief for the largest consumer, prices are back above all-time highs denting some appetite for the consumers. However, as has been the case for decades, investors tend to get used to higher prices over time and demand catches up again, Commtrendz Research Co-founder and CEO Gnanasekar Thiagarajan told PTI.

Meanwhile, P N Gadgil Managing Director Saurabh Gadgil said, in volume terms the industry is likely to 'just meet last year's numbers'.

"Because of the Israel and the Middle East issue, gold prices have propped up as it looked as a safe-haven. During Dussehra what we saw was there's been a growth in value because gold has gone up... Business has gone up by 15-20 per cent and in volume terms we have been able to just meet last year's numbers," he added.

Despite all-time high price levels, some jewellers and retailers believe though consumer demand could take a hit, central bank and investment demand could more than compensate for that.

"Even as the prices are moving up we are expecting good business and the sales are likely to be similar to last year as there are over 40 lakh weddings taking place after Dhanteras. We are expecting sales volume to be around 20-22 tonnes on Dhanteras day, which is similar to last years'," All India Gem and Jewellery Domestic Council (GJC) Chairman Saiyam Mehra told PTI.

After the Budget, he said, when the government reduced the duty to 6 per cent from 15 per cent, the business picked up, however, with rising prices currently it is 10 per cent less compared to last year.

"However, we expect the sales to pick up during the Diwali festivities. Besides, we are also expecting the casual investment section to do well with consumers buying lightweight items like bracelets, earrings, rings among others," he added.

Jewellery retailer Kalyan Jewellers' Managing Director T S Kalyanaraman said, "looking at the strong footfalls during the second quarter we are optimistic about sales during the festivals. Pre-book orders for the festivals are also looking good. It is usually seen that when there is a sudden hike in price, consumers take a pause... Nowadays consumers buy with a budget, so we don't talk about volume anymore," he added.

World Gold Council Regional CEO, India, Sachin Jain said that despite gold prices touching record highs, anecdotal feedback from the industry indicates a resurgence in gold buying due to various ongoing festivals, with demand largely driven by investment sentiment and wedding related purchases.

"There is also an expectation of increased demand from rural areas, driven by improvements in robust economy and consumption. Good monsoon and higher crop sowing this year are anticipated to boost rural incomes further, potentially leading to higher gold purchases. Overall, we are expecting gold demand to continue this Diwali and till the end of the year due to the wedding season," he added. PTI SM DRR