Daijiworld Media Network – Mumbai
Mumbai, Jul 6: Despite a sharp decline in gold prices from record highs earlier this year, jewellery retailers across Mumbai's iconic Zaveri Bazaar are witnessing sluggish sales, with customers delaying purchases in anticipation of further price corrections.
Jewellers said business has remained weak over the past two months, with even the ongoing festive season failing to generate the usual demand. While the monsoon has contributed to lower footfall, traders believe volatile gold prices are the primary reason consumers are staying away.
Industry experts said buyers typically postpone purchases when prices are falling, hoping for further declines, unlike during periods of rising prices when demand often remains strong.
"Customers do not buy in a falling market. They wait for prices to fall further before making a purchase," said jeweller Rajubhai Solanki, adding that demand is expected to recover only after prices remain stable for a sustained period.
Jewellers said gold purchases are largely driven by investment or special occasions rather than necessity, prompting buyers to wait for the most favourable prices.
While retail demand remains subdued, experts noted that wholesale and business-to-business (B2B) buying has improved after domestic gold prices fell below the psychological level of Rs 1.5 lakh per 10 grams. Dealers have reportedly begun rebuilding inventories in anticipation of future demand.
Retailers also said their profit margins have improved as lower gold prices have reduced procurement costs while making charges remain unchanged. However, sales volumes have not shown any significant improvement due to continued price volatility.
The market has also witnessed a shift in consumer preferences, with buyers increasingly opting for lower-carat jewellery, studded ornaments and gold exchange schemes instead of purchasing heavier gold jewellery.
Industry participants remain optimistic that demand will improve during the wedding and festive season between October and February, provided gold prices remain stable. Last year's festive season had witnessed weak demand because of record-high prices.
Gold prices have declined sharply after touching record levels earlier this year. According to data from the Multi Commodity Exchange (MCX), August gold futures have fallen from around Rs 2.04 lakh per 10 grams in January to nearly Rs 1.43 lakh. Spot prices have also eased to around Rs 1.40 lakh per 10 grams.
Globally, gold prices have weakened due to a stronger US dollar, expectations of further interest rate hikes by the US Federal Reserve and slower purchases by central banks amid the ongoing West Asia conflict.
Analysts said higher interest rates reduce the appeal of non-yielding assets such as gold, encouraging investors to shift towards fixed-income investments.
However, the decline in international prices has only been partially reflected in India because of higher import duties. The Centre increased the effective import duty on gold to 15 per cent in May from 6 per cent earlier, limiting the extent of price correction in the domestic market.
Jewellery demand also suffered after Prime Minister Narendra Modi appealed to citizens in May to avoid non-essential gold purchases as part of austerity measures aimed at easing pressure on the country's foreign exchange reserves.
According to the Ministry of Commerce, India's gold imports stood at USD 3.4 billion during the latest reported period, up 34 per cent year-on-year but down 39 per cent compared to the previous month.
Industry representatives believe the recent correction has improved consumer sentiment and expect demand to strengthen in the coming months, provided gold prices remain stable. They maintain that price stability, rather than further declines, will be the key factor in reviving retail jewellery sales.