Soaring gold prices force purity cut: What it means for listed jewellers

Jewellery retailers are catching on: Titan’s Tanishq, for instance, has widened its 18-karat range, particularly targeting the wedding market. Senco Gold says demand for 14-karat and 18-karat pieces is on the rise, with the industry already eyeing a 9-karat future.

Karats indicate the purity of the gold. Gold of 24 karats is the purest form (99.9%), 22 karats is typically used for jewellery and is mixed with other metals like copper or silver to make it more durable. Gold of 18 karats is also used for jewellery and contains a higher percentage of alloys.

Grammage is the weight of gold. The price of gold is calculated by its price per gram, multiplied by the percentage of its purity. The purer the gold, the higher the price.

On Wednesday, the rate for 10 grams of 24-karat gold stood at ₹1,26,028.89, while 22-karat gold was priced at ₹1,15,525.99. Meanwhile, 18-karat gold retailed at about ₹94,521.26 for 10 grams. These are prices for New Delhi, sourced via brokerage platform Angel One.

MCX Gold closed at a record high of ₹1,26,401 per 10 grams on Wednesday.

The shift in karat preferences appears structural as organized players increasingly thrive on lighter, lower-karat designs, according to Sandeep Abhange, a research analyst at LKP Securities Ltd.

But more importantly—is this shift here to stay or just a passing trend sparked by high gold prices and changing tastes? The shift towards lower-purity gold jewellery is not new, but it has become far more pronounced in recent years as gold prices soared.

Preference changes

According to Saumen Bhaumik, managing director of jewellery retailer CaratLane, with gold prices increasing, the earlier customer resistance to lower purity levels is easing.

“I think it's going to be the way. And we are banking on it and therefore we are expanding it," Bhaumik said on a call with analysts on 11 August.

Hareesh V, head of commodity research at Geojit Investments Ltd, pointed out that it’s not just the big brands—even local jewellers are expanding into 18- and even 9-karat gold pieces.

“There’s been a clear change in preferences among women and brides, who now lean towards lighter, more delicate designs—and those are typically crafted from lower-purity gold," he explained.

However, Hareesh noted that if gold prices were to decline, customers might once again gravitate towards higher-purity jewellery. But the rally in gold looks set to continue, driven by a mix of global factors, including the latest round of additional tariffs on China, he added.

Retailers are pushing more 18-karat collections to ensure consumers don’t have to over-extend their shopping budgets. India’s top jewellery chain, Tanishq, has seen good traction with the recently introduced 18-karat gold jewellery in select markets.

“We are now trying to increase that quantum as we go forward. We want more and more people to consider 18 karat. We have also perfected an alloy in 18 karat, that looks very close to 22 karat. This will help ensure consumers remain comfortable with the average price point," said Ajoy Chawla, head of Titan’s jewellery division. “It’s available in certain markets—we will expand it significantly over the next six months."

Chawla sees greater opportunity in studded, 18-karat jewellery going to 14 karats and 14 karats going to 9. So, lower karats are being accepted in the market, Chawla added.

Open to experimenting

Consumers in south India have traditionally purchased 22-karat gold, with 18-karat gold not considered appropriate for occasions such as weddings. However, consumers in markets such as Bihar are more open to experimenting with 18-karat gold, Chawla said.

To be sure, for Tanishq, 18-karat gold still accounts for only a “small part" of its plain gold jewellery purchases—though it is common for studded jewellery sales to take place in 18 karat. Studded jewellery refers to pieces set with precious stones, as opposed to plain gold jewellery.

According to Gaurav Jogani, director – consumer discretionary at JM Financial Institutional Securities Ltd, if gold prices were to drop by 20-30% or more, some customers might increase the grammage (the total weight of gold in a piece of jewellery) or upgrade to higher-purity ornaments, as the focus would be on buying a particular value of jewellery.

On how this could impact listed jewellers, Jogani clarified a common misconception: “Many assume that lower purity means lower gold value, and therefore, lower making charges. But that’s not really the case."

He explained that making charges are usually set per gram—say, ₹1,000 per gram—and in cases where the making charges are on a percentage basis, jewellers tend to keep the absolute profitability in check.

Jogani also highlighted that listed jewellers see better profitability only when same-store sales growth (SSSG) is in high single digits or more and comes organically, not through heavy discounts or promotions.

In the times of soaring gold prices, lower-karat jewellery will support volume growth, albeit at a lower average selling price. So, revenue growth will be a mix of value and volume. As the share of lower-karat jewellery improves, profitability will also be higher as studded jewellery typically commands higher making charges, which results in better flow through to profitability, explained Vaibhav Dinesh Muley, lead analyst—hotels & hospitality at YES Securities.

Studded designs

Branded jewellers are boosting the share of lower-karat jewellery by launching more studded (diamond) designs, which typically require less pure gold for manufacturing and appeal to younger buyers. This push is backed by higher marketing spends, niche brands for lower-karat segments, and offers such as full-value diamond exchange and discounted making charges on studded pieces, he added.

“We first kept 9-karat jewellery online only. After we saw customers buying without hesitation, we took it to a few stores. Once we saw acceptance, we decided it’s time to go national. Our 9-karat jewellery ensures prices stay below ₹15,000—that’s the design challenge," Bhaumik said at the launch of its new CaratLane store in Bengaluru. CaratLane is primarily a diamond jewellery retailer.

CaratLane introduced its 9-karat gold jewellery earlier this year during Valentine’s Day. Since then, 9 karat has contributed to 1% of its sales. It’s not that big but 1% of CaratLane’s size and scale is not that small, given the few months' time since it was introduced, said Bhaumik.

The retailer is also experimenting with silver jewellery. Gold prices may not come down easily, so it has introduced 925 silver with good-quality diamonds so customers can still buy precious jewellery at ₹5,000.

“Nine-karat gold and silver diamonds are complementary categories, not competing ones. These options simply give customers more choice," he said.

Healthy growth

Even with gold prices skyrocketing, Q2FY26 updates from some listed jewellers show that demand from investors is still going strong.

In its Q2FY26 update, PN Gadgil Jewellers reported a healthy SSSG of 29% over the previous quarter. The gold category rose 24% in value and 15% by volume. Titan Company said its domestic jewellery business grew about 18% year-on-year in the quarter.

Kalyan Jewellers said that the recently concluded quarter has been “a very gratifying one," with consolidated revenue growth of approximately 30% from the same period in the previous financial year.

Jewellery stocks have been a mixed bag, driven not just by gold prices but also by company-specific news. Shares of PN Gadgil Jewellers have declined 15% over the past year, while Sky Gold and Diamonds gained about 3%, and Titan Company edged up just 1.2%. In contrast, Senco Gold shares plunged 55% during the same period.

PNG Jewellers’ Q2 revenue rose about 31% YoY, Titan’s jewellery business grew about 19%, while Sky Gold clocked an impressive 46% revenue CAGR over the past five years, with almost 80% of its sales from light jewellery.

(Suneera Tandon and Vaeshnavi Kasthuril contributed inputs to this story.)