Gold prices in India have seen a significant rise in recent months. As of Tuesday, the price of 10 grams of 24-carat gold stood at Rs 72,480, up from Rs 63,970 on January 1. This marks a 14 percent increase in FY24, with current prices about 19 percent higher than the FY24 average. The question now is whether these higher prices will deter consumers from purchasing gold jewellery.
ICRA Predicts Consumer Caution
According to a note by rating agency ICRA, domestic jewellery consumption in value terms is expected to slow to 6-8 percent in 2024-25 due to the high prices, a steep drop from the 18 percent growth seen in 2023-24. The sales volume of gold jewellery is also expected to decline this year, following growth of 2 percent in FY23 and 4 percent in FY24.
ICRA stated, “Consumers are expected to remain watchful of the price movements and adjust to the new price levels over two or three quarters.” The agency also anticipates that the share of recycled gold in the overall supply will increase by 400-600 basis points in FY25 due to the elevated gold prices.
Sujoy Saha, vice-president and sector head at ICRA, noted that revenue growth for 15 large jewellers, representing 75 percent of the organised market, is likely to slow to mid-to-high single digits in FY25. These jewellers had seen a 16 percent expansion in FY24.
Saha attributed this slowdown to subdued consumer sentiments and high gold prices, despite strong store expansion plans and structural tailwinds. He added, “Wedding and festive demand is likely to be relatively muted amidst a relatively lower number of auspicious days in FY25.”
Continued Store Expansion
Despite the challenges, ICRA observed that the store count for the 15 companies increased by 21 percent in FY24, following a 20 percent rise in FY23. This growth was driven by large retailers aggressively adding stores in recent years to capture market share as consumer preferences shifted towards organised players.
Saha expects this trend to continue, stating, “The store additions are likely to continue in the near to medium term as well, although the players will remain watchful of consumer sentiments.”