Gold's roaring rally brings the fence-sitters back to jewellers, but investors may need to think again

Benchmark gold price on commodity derivatives exchange MCX hit a record ₹121,000 per 10 gm on Tuesday. The price took cues from abroad, where gold extended its tearaway rally following the US government shutdown, weakening dollar and political and economic chaos in France.

Despite soaring prices, this year's Diwali may set a new record in sales, an industry expert said, while another cautioned that this may not be the best time to buy gold as an investment.

"FOMO has gripped buyers, who were anticipating a correction since the price topped ₹1 lakh (on 21 August)," said Surendra Mehta, national secretary of India Bullion and Jewellers Association. "After subdued demand, we are getting reports of heavy footfalls at jewellery outlets over the past three days for jewellery and bar and coin purchases." Based on footfall reports from trade for the festive season, Mehta estimates a record 45 tonnes of gold to be sold this Diwali (18-23 October).

Demand had "indeed" picked up over the past few days, owing to not just festive demand but also wedding season demand, which begins in November through February, said Shekhar Bhandari, president of Kotak Mahindra Bank. Bhandari refrained from commenting on volumes expected this festive season, but cautioned those buying for investment purposes that prices had probably peaked, with the metal hitting $4,000 an ounce (31.1 gm) on the US exchange Comex on Tuesday.

Naveen Mathur, director at Anand Rathi Group, also warned that "profit-booking, followed by consolidation," was likely in the short term. In the long term, though, the outlook remained bullish, Mathur added. He estimated a range of ₹116,800- ₹122,000 for the rest of the year.

The yellow metal, as measured by the stock exchange MCX's generic gold contract, has risen 56% in the calendar year so far, far outstripping gains from the stock market. The high prices did have an impact on demand--commerce ministry data shows that gold imports till the end of July were down 25% to 251.14 tonnes from 337 tonnes in the year-ago period. The price during January-July this year averaged ₹90,632 per MCX generic gold data cited by Bloomberg. This was 37% above the average price of ₹68,187 in the same period of 2024.

“As we move into the festive and wedding season, jewellery purchases continue to be seen as occasion-led rather than discretionary. With prices trending upward, customers are choosing to buy rather than wait, and old gold exchange remains healthy at about 30%," said Ramesh Kalyanaraman, executive director of Kalyan Jewellers, one of India's largest jewellers.

Kalyanaraman said that in urban and northern markets, there is growing interest in 18 carat gold, which was earlier used mainly for diamond jewellery, and is now also being chosen for even traditional designs in gold. Demand for silverware used in religious and celebratory occasions has risen too.

"The quarter has begun on a strong note, with robust footfalls across key markets. Backed by healthy pre-bookings, new collections, and campaigns, along with the launch of 15 additional showrooms before Diwali, we remain optimistic about the season ahead," said Kalyanaraman.

"Consumers have been holding back and unsure because gold prices were climbing," said Ajoy Chawla, chief executive officer, jewellery division of Titan Ltd, India's largest jewellery retailer. "Demand has been impacted a bit because gold prices have jumped over 50% year to date. Now that they are not seeing prices correct, but rather climbing at an alarming rate, consumers at our stores have begun buying for the festive season. Exchange offers and festival campaign at our stores are pulling customers in. A combination of Navratras and Diwali coming together is stimulating demand."

(With inputs from Suneera Tandon)