Gold prices surged to record highs, reaching $2,942.70 an ounce this week, fueled by global trade concerns and potential new U.S. tariffs. This rally has significantly impacted jewelry sales, particularly in India, where the wedding season typically drives strong demand.
In India, a country where gold plays a pivotal role ain weddings, buyers are holding off on purchases due to escalating prices. “Customers keep asking when prices will drop,” said B. Muthuvenkatram, a jeweler in Coimbatore. The soaring prices have resulted in a 70-80% drop in jewelry demand, according to Surendra Mehta of the India Bullion and Jewellers Association. Domestic gold prices have reached ₹86,360 ($993.81) per 10 grams, a record high. Despite offering discounts of $30-$38 an ounce, dealers are seeing minimal interest as buyers adjust to these unprecedented prices.
Meanwhile, in China, another key gold consumer, prices have also cooled due to the high cost of gold. Discounts of $7-$10 per ounce were offered, but demand remains sluggish after a brief uptick ahead of the Chinese New Year. As a result, gold prices in China are now at a discount of $18 to $20 below the international spot price.
The World Gold Council reports that India outpaced China in jewelry consumption in 2024, with 563.4 metric tons of gold purchased, compared to 511.4 tons in China. Despite the drop in physical gold demand, analysts note strong buying in exchange-traded funds (ETFs) and by central banks, helping offset the decline in jewelry sales.
In summary, the recent gold price surge has dampened jewelry demand in both India and China, but alternative avenues of investment, such as ETFs and central bank purchases, are supporting the market.
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