Jewellery Buying Improves Ahead of Festive Season
Key Highlights
- Gold demand conditions are improving as consumers respond to lower and more stable prices.
- The World Gold Council expects improving demand to support a stronger festive season.
- Jewellery demand has strengthened as buyers view recent price movements as a purchasing opportunity.
- Deferred purchases are returning to the market, contributing to higher store footfall.
- Jewellers and manufacturers have begun replenishing inventories ahead of the festive period.
- Old-gold exchange remains elevated and continues to support new jewellery purchases.
- Physical investment demand remained supportive during the recent price correction.
- Gold imports more than doubled in value to $4.16 billion in July from $1.97 billion in June.
- July import volumes are estimated at 40-45 tonnes, compared with around 20 tonnes in June.
- Gold accounted for about 5 per cent of India’s merchandise imports during the period.
Mumbai, August 19: Gold demand in India is showing signs of improvement as consumers respond to lower and relatively stable prices, raising expectations of stronger buying during the upcoming festive season, according to the World Gold Council.
The World Gold Council’s latest India Gold Market Update said jewellery demand has strengthened as consumers increasingly view recent price movements as a buying opportunity.
Retailers and manufacturers have also started replenishing inventories ahead of the festive season, indicating greater confidence in the outlook for physical gold demand.
However, the council cautioned that gold prices remain elevated and could continue to influence jewellery purchasing decisions.
Lower prices bring buyers back
Recent movements in gold prices have encouraged consumers who had previously postponed purchases to return to the market.
Industry feedback cited by the WGC indicates that jewellery retailers are witnessing higher footfall and a recovery in demand beyond purchases linked primarily to weddings.
The return of deferred purchases is important for the market because elevated prices had earlier caused some consumers to delay discretionary jewellery buying.
More stable price conditions can provide buyers with greater confidence when making high-value purchases.
Festive season boosts industry confidence
Jewellery manufacturers have reportedly started receiving stronger order flows as retailers prepare for the festive season.
Inventory replenishment among jewellers has also accelerated, suggesting businesses expect consumer demand to strengthen during the important seasonal buying period.
Festivals traditionally represent a significant period for India’s gold market, with jewellery and investment purchases increasing around several major occasions.
The recent improvement in demand has therefore raised expectations of stronger activity during the coming festive months.
Old-gold exchange supports purchases
Exchange of old gold jewellery for new products remains elevated and continues to play an important role in supporting consumer purchases.
When gold prices are high, exchanging existing jewellery can reduce the amount of fresh cash consumers need to spend on new products.
Recycled gold therefore continues to supplement domestic supply while helping consumers manage the impact of elevated prices.
The trend is particularly relevant when consumers want to participate in wedding or festive purchases without bearing the full cost of buying entirely new gold.
Investment demand remains supportive
Physical investment demand has moderated from earlier highs but continues to provide support to the market.
Lower prices during the recent correction attracted investors seeking strategic exposure to gold, according to the WGC.
The subsequent rebound in prices also appears to have renewed investor interest.
Gold continues to attract investment demand as a portfolio diversification and store-of-value asset, although buying levels remain sensitive to movements in domestic prices.
Gold imports more than double in July
India’s gold imports rebounded sharply in July after two consecutive months of weakness.
The value of imports increased to $4.16 billion during the month, more than double the $1.97 billion recorded in June.
Import volumes are estimated to have increased to around 40-45 tonnes from approximately 20 tonnes in June.
The sharp rebound indicates stronger physical demand and inventory replenishment by jewellery manufacturers and retailers ahead of the festive season.
Imports point to stronger physical market
Recycled gold, primarily generated through consumers exchanging old jewellery for new products, continues to supplement supplies.
However, the simultaneous recovery in imports indicates that demand for fresh physical gold has strengthened compared with recent months.
Despite the increase, gold accounted for about 5 per cent of India’s total merchandise imports.
That remained substantially below the average share of around 11 per cent recorded during January-March, according to the World Gold Council.
Elevated prices remain a constraint
While recent price stability has helped bring consumers back into the market, elevated gold prices remain an important constraint on demand.
Consumers may continue adjusting purchase quantities, exchanging old jewellery or postponing discretionary buying if prices rise sharply again.
For now, stronger retail footfall, higher manufacturer orders and rising imports indicate improving sentiment across India’s physical gold market as the industry prepares for the festive season.
