The recent surge in gold prices has left both consumers and investors in shock, with its effects being felt across India, the Middle East, and Asia’s jewelry trade. Gold prices have surpassed USD 3000 per ounce globally, while in India, prices have breached the Rs 90,000 mark. As a result, the market is witnessing a surge in gold sales, with people rushing to sell their old jewelry. However, despite this, shops are experiencing a strange paradox—showcases are filled with gold, but customers are nowhere to be seen.
Traders Report Profit But Expect Decrease in Demand
Traders in the market have reported a significant 25% increase in profits over the past seven months due to the skyrocketing prices. However, despite these gains, experts are concerned about the future of gold demand. According to Prithviraj Kothari, Chairman of the India Bullion Jewelers Association (IBJA), if gold prices continue to rise, demand could drop by as much as 30 per cent. Customers are finding it increasingly difficult to buy gold at these inflated rates, especially with the upcoming wedding season.
Weddings Fail to Spark Demand Amid High Gold Prices
In a country like India, the wedding season traditionally sees a surge in gold buying. However, this year, customers are noticeably absent from the market. Many individuals planning weddings have expressed concern over their budgets, which are being stretched thin due to the soaring gold prices. Even those who typically purchase large quantities of gold for weddings are hesitating, as the prices are far beyond their expectations.
Recession-Like Conditions in China and the Middle East
The situation is not limited to India alone. The economic conditions in China and the Middle East are also contributing to the reduced demand for gold. In China, there is a recession-like atmosphere, and the Middle East has seen a dip in gold purchases as well. Indian tourists, who typically buy gold in large quantities to save on taxes, are also buying much less than they did before. Meanwhile, the Chinese are increasingly turning to gold coins rather than jewelry as a safer investment option.
People Flock to Sell, but Show Little Interest in Buying
The impact of rising gold prices is also visible in markets like Singapore’s Chinatown, where customers are showing little interest in buying gold. Instead, many are bringing in old, broken, or gold-plated jewelry to sell. The selling spree has become more prominent than gold purchases, as consumers prefer to cash in on their existing jewelry instead of acquiring new pieces.
Gold Still Seen as a Safe Investment, But Traditional Demand Faces Pressure
Despite the slowdown in demand for jewelry, experts agree that gold remains a safe and stable investment option. However, the traditional demand for gold jewelry is under pressure due to its high prices. In these uncertain times, gold is seen less as a material of beauty and more as a financial asset, which may reshape its role in the market for the foreseeable future.
