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Gold Prices Soar Past ₹1 Lakh Mark, Consumers Shift to Lighter Options Amidst Economic Headwinds

New Delhi: The Indian precious metals market is experiencing a notable surge, with gold prices breaching the ₹1 lakh per 10-gram mark, a level last seen on April 22nd. This dramatic increase, attributed to a confluence of global economic uncertainties and domestic currency pressures, is prompting a notable shift in consumer purchasing behavior.

The geopolitical landscape, particularly the trade war between the US and China which led to earlier tariff announcements, has been a recurring factor in gold’s upward trajectory. More recently, NATO’s warnings of secondary sanctions on russian oil imports have further destabilized global markets, weakening the Indian Rupee.As india is a net importer of gold, a depreciating rupee directly translates to higher domestic prices.

Silver has not been immune to this bullish trend, experiencing a substantial jump of ₹4,500 per kg in a single day, reaching ₹1,15,500 per kg on Wednesday from ₹1,11,000 per kg the previous day. Analysts point to a weaker dollar index and ongoing trade tariff uncertainties as key drivers, bolstering demand for these traditional safe-haven assets.

The impact on consumer spending is palpable. Suvankar Sen, Managing Director of jewelry chain Senco Gold, notes that the escalating prices are forcing consumers to gravitate towards lighter gold jewellery pieces that fit within their budgets. “Volume-wise, the drop will be 15%,” Sen stated. “If the price rise continues, then demand for 18-karat, 14-karat, and 9-karat gold jewelry will increase.”

This sentiment is echoed by industry stakeholders.Dinesh Taluja, Chief Financial Officer of Reliance Retail, recently informed analysts that while higher gold prices have boosted bill values for their jewelry business, the actual number of transactions has declined. “The business is on steady growth, but obviously, there is an impact from the significant increase in gold prices. In volume terms, the demand for gold has gone down,” he indicated.

The upcoming festive season, commencing with Raksha Bandhan and extending through Diwali in October, is typically a peak consumption period for gold in India, second only to the winter wedding season.However, officials from the India Bullion & Jewellers Association (IBJA) anticipate subdued sales for Raksha Bandhan, as consumers struggle to accept prices around the ₹1 lakh mark.

In Mumbai’s renowned Zaveri Bazaar, a traditional gold trading hub, foot traffic has reportedly decreased significantly. “Unless the price settles near ₹93,000 – ₹94,000 per 10 gm,demand will not see an uptick,” commented a representative,highlighting a crucial price point for a potential recovery in sales.

Consequently, persistently high gold prices have suppressed overall demand. Consumers are increasingly deferring non-essential purchases and opting for more budget-kind alternatives. This includes a growing preference for lighter gold jewelry,lower-karat gold,silver,or intricately studded pieces.

Kavita Chacko, India Research Head at the World gold Council, observes that the trend of exchanging old gold jewelry to manage costs is gaining momentum, according to market intelligence. While investment-driven buying remains, there’s a noticeable preference for gold bars, coins, and plain gold chains, often favored for their lower fabrication charges when viewed as quasi-investments. Anecdotal reports suggest a concentration of demand in lower-grammage coins, particularly those weighing less than 10 grams.

How do geopolitical instability and inflation contribute to the current surge in gold prices?

Gold Prices Surge,Impacting Festive jewelry Sales

The Current Gold Market Landscape

As of July 23,2025,gold prices are experiencing a significant surge,reaching levels not seen in recent months. Several factors are contributing to this upward trend, including:

Geopolitical Instability: Global uncertainties and escalating geopolitical tensions are driving investors towards safe-haven assets like gold.

Inflation Concerns: Persistent inflation, despite central bank efforts, continues to fuel demand for gold as a hedge against currency devaluation.

Weakening US Dollar: A softer US dollar generally makes gold more attractive to international buyers.

Increased Investment Demand: Institutional and retail investors are increasing their allocations to gold, further pushing up prices. The forum at Gold.de reflects growing interest in precious metal investments.

This price increase is directly impacting the festive jewelry market, a traditionally strong period for gold demand.

Impact on Festive Jewelry Sales – A Regional Breakdown

The effect of rising gold prices varies across diffrent regions, depending on cultural significance and consumer spending habits.

India: India is one of the largest consumers of gold jewelry, particularly during festivals like Akshaya Tritiya, Diwali, and weddings.higher gold prices are leading to a decline in volume sales, as consumers postpone purchases or opt for lighter-weight jewelry. Many are exploring options like gold-plated jewelry or reducing the purity of gold (e.g., shifting from 22K to 18K) to manage costs.

China: Similar to India, China witnesses a surge in gold jewelry demand during festivals like the Lunar New Year and the Mid-Autumn Festival. The rising prices are impacting sales, but the Chinese market is also influenced by economic growth and consumer confidence.

Middle East: The Middle East has a strong cultural affinity for gold jewelry, especially during occasions like Eid and weddings. While demand remains relatively resilient,consumers are becoming more price-sensitive and are exploring choice designs and lower-carat options.

Western Markets (US, Europe): In Western markets, gold jewelry is often purchased for special occasions and as a luxury item. The price surge is likely to have a more pronounced impact on sales, as consumers may delay purchases or seek alternatives like platinum or silver jewelry.

Consumer Behavior Shifts & strategies

Consumers are adapting to the higher gold prices in several ways:

1. Downsizing: Purchasing jewelry with lower gold weight.
2. Opting for Lower Carat Gold: Choosing 18K or 14K gold rather of 22K or 24K.
3. Exploring Alternatives: Considering jewelry made from other precious metals like platinum or silver.
4. Delaying Purchases: Postponing jewelry purchases in anticipation of a potential price correction.
5. Increased Scrapping: More individuals are selling old gold jewelry to capitalize on higher prices. This recycled gold is then re-entering the market, partially offsetting the demand for newly mined gold.

Jewelry Retailer Responses

Jewelry retailers are implementing various strategies to mitigate the impact of rising gold prices:

Introducing Lighter designs: Offering jewelry designs with reduced gold content.

Promoting Diamond & Gemstone Jewelry: Shifting focus towards diamond and gemstone jewelry, which are less affected by gold price fluctuations.

Offering Discounts & promotions: Providing discounts and promotional offers to attract customers.

Focusing on Making Charges: Reducing making charges (labor costs) to make jewelry more affordable.

digital Conversion: Investing in online sales channels and virtual try-on technologies to reach a wider audience and reduce overhead costs.

Gold ETFs: These funds track the price of gold and offer investors a convenient and liquid way to gain exposure to the gold market.

Sovereign Gold Bonds: Issued by the government, SGBs offer a fixed interest rate along with the potential capital recognition from gold price increases.

Long-Term Investment: Gold is still considered a valuable long-term investment, offering a hedge against inflation and economic uncertainty.

Festive Season Impact: The impact on festive jewelry sales will likely continue, with consumers becoming more cautious and price-sensitive.

Innovation in Jewelry Design: Jewelry retailers will need to innovate and offer creative designs that appeal to consumers while minimizing gold content.