As one of the world's largest consumers of gold, surging gold prices and the knock-on effect of the Covid-19 pandemic have hit India's jewellers hard over the past two years.
However, jewellers are banking on this month's festive and wedding season to restore some of the shine to gold sales as prices stabilise and the economy begins to recover, which they hope will motivate Indians to loosen their purse strings in the coming weeks.
“All indicators look positive,” says Ajoy Chawla, chief executive of the jewellery division at Titan Company, a unit of Tata Group's luxury products division. “Our hope and expectation is that this year's season should be better than last year.”
Consumer sentiment has improved dramatically and there is pent-up demand, Mr Chawla says. This is an opportunity for the jewellery market to gain a significant share of consumer spending as travel, for example, remains off the cards for many people amid the pandemic, he adds.
In a push to revive the market, jewellers are launching new ranges that offer buyers good value and are even selling gold digitally to attract a younger demographic of tech-savvy customers.
Titan's jewellery brand Tanishq is among them and the stakes are high: October and November normally account for 25 per cent of its business for the year, Mr Chawla says.
“There is, of course, the perennial interest in gold and I think Indians and gold can never be far away [from each other],” he says.
India is well known for its love of gold, which is considered an essential feature of weddings, while the upcoming Hindu festivals of Dussehra this month and Diwali next month are considered auspicious days to buy bullion.
The last three months of 2020 accounted for the strongest quarter of the year for gold demand. But overall, the pandemic and record-high prices in India took a toll in 2020 and the country's gold demand fell more than a third to a 25-year low of 446.4 tonnes compared with 690.4 tonnes in 2019 amid Covid-19 lockdowns, according to data from the World Gold Council.
Gold prices hit a record high above 56,000 rupees ($755.20) per 10 grams in August last year, pushed up by global rates combined with weakness in the Indian rupee.
But prices have eased in recent months to stabilise at about 48,000 rupees per 10 grams – and that could be enough to tempt customers to make purchases.
“Since the festivals are coming, I would say that the lower prices would somehow make people enter the market and buy physical gold – bars, coins, jewellery,” says Naveen Mathur, director of commodities and currencies at Anand Rathi, a financial services firm in Mumbai.
“People now have come out of the uncertainty of their incomes, their job uncertainty, which everybody felt in 2020. The purchasing sentiments are high.”
Crisil Ratings, which is part of rating agency S&P Global, has forecast that revenue for gold jewellery retailers in India will grow 12 per cent to 14 per cent in the current financial year, which runs until the end of March 2022.
“Pent-up demand from weddings, which account for 55 to 60 per cent of overall jewellery sales, and festivals will help resurrect revenue just as they did last fiscal [year],” says Anuj Sethi, a senior director at Crisil Ratings.
The organised segment of the market will “benefit from lower import duty and introduction of mandatory hallmarking from June 2021, which will make them more competitive compared with unorganised players”, Mr Sethi adds.
Meanwhile, Bhavya Seth, director at Rainbow Diamonds, which has a store in Delhi that sells gold and diamond jewellery, says he's “very, very optimistic and looking forward to this festive and wedding season”.
Last year was “a rough journey” for his business and other jewellers, he says.
“The demand for gold plunged immensely due to the lockdown,” he adds. “Those were some murky days filled with disparity all around. Gold jewellery sales were down by a huge percentage. Only a few were purchasing jewellery for marriages.”
But with Covid-19 infections on the decline since the deadly second wave of infections that hit the country in April and May this year and curbs easing, Mr Seth is upbeat.
“India is famously known for big fat weddings,” he says. “And as some relaxations are being given by the government and India is a country where all the festivals are celebrated in a beautiful way, where it's auspicious to buy precious metals, the sales will go higher than the previous year.”
Business is already “getting back on track”, albeit “at a turtle speed”, Mr Seth says.
Interest in gold as a pure investment, however, is more subdued compared with last year because it is an asset that investors typically flock to as a safe haven during times of unpredictability, analysts say.
Risk appetite has now returned to the market amid an improving global economy and investors are now favouring other options including equities, they add. However, the trend is different for consumers and retail buying can help to support the market.
“Gold has always been a way to communicate how we all value our family and friends, a reason gold has been integral in the gifting and not necessarily saving,” says Sudheesh Nambiath, head of the India Gold Policy Centre at IIM Ahmedabad. “This has only got stronger after more than a year of pandemic. The urge to spend on things that sends positive vibes within the family is higher.”
The gold price is correcting itself, says Colin Shah, chairman of India's Gem and Jewellery Export Promotion Council.
“This has only reinforced consumers’ faith in investing in gold. We're expecting a positive festive season,” Mr Shah says.
This comes as a relief to jewellers, who were struggling even before the pandemic began due to a sharp rise in gold prices in 2019.
“The pandemic hit the gem and jewellery sector hard in the initial months of 2020 and again during the second Covid wave around March to April this year,” says Mr Shah. “But India has an eternal bond with gold. The yellow metal’s prices are stabilising and jewellers pan-India are upbeat already.”
However, given that gold prices are still relatively high, consumers are gravitating towards items that present good value.
“Lightweight gold jewellery is in high demand due to high gold prices,” says Mr Shah.
Jewellers are well aware of this trend and are adapting to the changing market.
“In the high gold price regime, customers are definitely looking for beautiful pieces, but which fit within their budget and that has been the brief for our design team over the last one to one-an-a-half years,” says Mr Chawla.
In another push to attract more customers to buy gold at a time when prices are still prohibitive for many, Tanishq last month unveiled a digital gold product that allows customers to purchase the precious metal from as little as 100 rupees online, and to gradually build up their savings.
The idea is that once a customer has amassed enough gold that has been virtually bought, they have the option to convert it into physical gold in the form of jewellery at one of the 360 Tanishq retail stores across the country or on its website.
The company is “seeing very good interest in this, especially among a younger audience”, Mr Chawla says.
“A couple of thousand of people are coming in every month to buy digital gold and we're starting to see some of them also beginning to redeem their digital gold in jewellery.”
Tanishq is not the only jeweller venturing into virtual gold. Kalyan Jewellers India and Senco Gold are among the companies that have also launched similar initiatives.
With such steps, jewellers hope that a much-needed boost to demand will materialise and bring some festive cheer to the sector. However, Mr Chawla warns: “Hopes in the industry are very high, [but] the outlook is very difficult to predict.”
