Jewellers brace for weak Diwali sales as gold prices soar

As Indians prepare to celebrate Diwali later this month, jewellers are facing a challenging landscape due to soaring gold prices, which have dampened consumer confidence and demand for gold purchases during the festive season.

This week, domestic gold prices in India reached a staggering Rs 77,641 ($923.85) per 10 grams, marking a more than 15 per cent increase from a low of Rs 67,400 in July. The ongoing price rally has left many jewellers feeling uncertain about their sales prospects for Diwali, a time when buying gold is considered particularly auspicious.

“The ongoing price rally is slowing down the demand. Consumers are buying less volume because they need to allocate far more money if they want to buy the same volume they planned with the rising prices,” said Bachhraj Bamalwa, a partner at the renowned jewellery retailer Nemichand Bamalwa & Sons.

In an effort to attract customers, Indian dealers have started offering discounts, with rates dropping to as much as $8 an ounce below official domestic prices, compared to a $3 premium just a week ago. This shift underscores the urgency of the situation as jewellers aim to stimulate sales during a period traditionally marked by increased gold purchases.

“Jewellers aren't feeling too confident about Diwali sales this year due to rising gold prices,” noted a Mumbai-based bullion dealer. “To keep customers interested, many are offering discounts on jewellery making charges to help boost their sales during the festive season.”

Meanwhile, the scenario is different in China, where gold dealers have narrowed their discounts to between $3 and $14 below international spot prices, down from discounts of $15 to $31 the previous week. This reflects a tightening market, although the overall demand remains sluggish due to high prices and a struggling economy.

The lack of consumer confidence is evident in both markets, with experts predicting that Chinese demand for gold is unlikely to recover significantly in the next few months as prices are expected to continue their upward trajectory.

As Diwali approaches, Indian jewellers face the dual challenge of high prices and wavering consumer sentiment. With the festive season approaching, the hope is that strategic discounts and promotional offers will resonate with consumers looking to celebrate in style despite the economic pressures.