COMMENTARY – Indian gold jewellery retail will face new challenges post lockdown


By David Brough

A bullish gold market will encourage jewellery customers to scrap their gold, but high-value gold jewellery demand in India will face tough times post lockdown as the economic downturn bites, a trade webinar heard.

India is a leading gold consuming country with a vast cultural appetite for the yellow metal driven by weddings and festivals.

The well-attended webinar on April 25, 2020, coordinated by India’s Art of Jewellery magazine, heard the opinions of senior Indian gold jewellery retailers and refiners from across the country.

A common view was that the gold price would remain buoyant near-term, with support at $1,600 per ounce and with potential to touch $1,800 soon.

Gold was down 0.4 percent to 1,724.29 per ounce on April 24, not far off recent 7-1/2-year peaks driven by monetary stimulus measures around the world to combat the emergency.

Indian gold jewellery

The Indian retailers were sceptical that gold prices would soar imminently to new all-time highs.

If Indians lose their jobs in droves in the severe economic downturn now playing out due to COVID-19, there could be a surge of customers looking to scrap their high-priced gold for much-needed cash at jewellery retailers.

Some retailers were concerned over whether they could handle an acceleration of requests from customers to scrap gold, especially as they may find it hard to sell gold jewellery due to the economic downturn.

However, retailers were confident that gold jewellery demand is relatively inelastic in India due to the cultural appreciation of the yellow metal, and expressed optimism about prospects for festival gold jewellery demand later this year if the lockdown eases.

Middle class gold savers will be reluctant to cash in their holdings, but the needy may come forward, jewellers said.

“If people lose their jobs, they may sell,” one jeweller said.

Opinion was divided over the outlook for the Indian gold import duty.

Despite the government’s need for funds to tackle the crisis, any argument for raising the gold import duty would only add to an already challenging retail climate for gold jewellery sales.