As gold prices soar to new record highs, jewellers across Asia and the Middle East are facing a shift in consumer behavior, with customers flocking to sell their old jewellery and coins instead of buying new pieces. This surge in gold sales could have far-reaching implications, potentially dampening the ongoing rally and curbing imports into key markets, experts and retailers warn.
On March 14, spot gold prices surpassed $3,000 per ounce for the first time, continuing their upward trajectory throughout the following week, marking a more than 15% increase year-to-date. The price surge, which follows a nearly 30% rise in 2024, has been fueled by a combination of political and financial uncertainty, prompting increased demand for both physical gold and scrap gold.
In India’s Zaveri Bazaar, the country’s largest bullion market, gold buyers, who have long been overlooked, are now seeing a spike in business. Unmesh Patel, a textile trader, shared his experience of making a 25% return by selling four 10-gram gold coins he purchased less than seven months ago. He capitalized on India’s reduction in gold import duties, deciding to sell rather than wait for prices to climb higher.
Indian gold prices have risen over 32% since the government lowered import duties in July, reaching a record high of 89,796 rupees per 10 grams. While this price increase has sparked short-term profits for sellers, it has raised concerns for future demand. “If prices stay this high all year, India’s overall demand could drop by more than 30% in 2025,” warned Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA). The surge in prices has made it increasingly difficult for consumers to keep up with the rising costs, especially as their budgets remain static.
Despite the ongoing wedding season in India, which typically drives significant gold purchases, jewellers are reporting a sharp decline in customer traffic. Many buyers are opting to exchange old jewellery for new pieces as a way to offset high prices. Vaishnavi M., a bride-to-be in Kerala, shared her plan to exchange her mother’s old jewellery to manage the cost of her wedding. “The rates are so high that it would completely mess with my wedding budget,” she explained.
India’s scrap gold supply amounted to 114.3 tons in 2024, with projections from the World Gold Council suggesting this figure could rise in 2025. India, like China, heavily relies on imports to meet its gold demand, while the latter remains the world’s largest consumer, fulfilling about two-thirds of its need through imports.
In the Middle East, demand for gold is also waning. A Dubai-based bullion dealer noted a slowdown in purchases, even among Indian tourists who typically flock to the city to avoid import taxes. “A lot of Indian tourists usually shop in Dubai to avoid import taxes, but even they’re holding back,” the dealer said.
In the UAE, where 60% of gold demand is driven by jewellery, high prices have led consumers to purchase smaller items, according to Andrew Naylor, Head of Middle East and Public Policy at the World Gold Council. However, despite a decrease in volume, the overall value of jewellery bought in 2024 increased.
In China, weak retail demand for gold jewellery persists, with many consumers opting for coins and bars over higher-priced crafted pieces. Peter Fung, head of dealing at Wing Fung Precious Metals, noted that the trend of buying bullion rather than jewellery continues to dominate.
Other Asian markets are also seeing reduced demand for gold jewellery, with more consumers opting to sell or recycle their existing gold, or even use it as collateral for loans. In Singapore, Brian Lan, managing director at GoldSilver Central, reported an increase in the number of stores selling gold-plated silver and said that many clients are bringing in old, unused jewellery to sell or liquidate.
These shifting trends reflect the delicate balance between gold’s cultural significance as a traditional commodity and its evolving role as a financial asset. Analysts predict that while jewellery demand remains bleak, the investment demand for bullion is likely to remain robust, further supporting gold’s ongoing rally.
Related Topics:
