Kolkata: The rally in gold has pushed consumers to trade in their old household jewellery for new this festive season, driving up the share of gold exchanges in total sales to an all-time high for large jewellers in the Navratri to Dhanteras period, industry executives said.
For Tata-owned Tanishq, exchanges are expected to account for almost half the sales value on Dhanteras this year, compared with 35% last year. Reliance Retail said about a third of its gold jewellery sales are now coming through exchanges compared with 22% last year, while Senco Gold said the share has gone up to 45% from 35%.
People are recycling gold rather than investing in new gold because of the increase in prices, said Reliance Retail chief financial officer Dinesh Taluja.
“Average bill values are up pretty substantially (due to price increase). Now what has happened across the industry is that volumes have gone down because the purchasing power has been impacted due to a significant increase in gold prices,” he told analysts last week. “I think as the gold prices stabilise … the volumes will also pick up.”
Gold prices touched ₹1.34 lakh per 10 gm, including a 3% goods and services tax, on Dhanteras (October 18) – considered to be one of the most auspicious days to buy precious metals in India-up 69% compared with ₹80,469 on the same festive day last year.
According to government and industry estimates, Indian households have 22,000 tonnes of gold lying idle in their lockers. The price increase is prompting many to exchange their old family gold jewellery for new pieces.
Tanishq had launched a zero price-deduction programme on gold exchanges across all caratages during the festive season to attract such consumers.
During Navratri, the contribution of old gold exchange to total sales at Tanishq was 38-40%, chief executive officer Ajoy Chawla said in an interaction with ET before Dhanteras. “We see this number touching about 50% of sales by the end of Diwali,” he said.
Tanishq declined to share the final Diwali numbers as its parent, Titan Company, is in the silent period ahead of quarterly results announcement.
In a regulatory update earlier this month, Titan said the domestic jewellery business grew 19% in the July-September quarter from a year earlier, as higher gold prices offset a marginal decline in buyer counts and significant investments. The company also benefited from consumer promotions and the exchange offer to stimulate demand, it said.
Jewellers said the uptick in exchanges was largely limited to the West, North and East, with consumers in the South preferring to accrue new gold rather than exchange. India annually consumes 800-850 tonnes of gold and the South accounts for 40% of this.
Kalyan Jewellers executive director Ramesh Kalyanaraman said festive buying and old gold exchanges were largely driven by non-South markets. For the Kerala-headquartered chain, markets outside the South account for 30% of sales.
There was a rise in the purchase of gold and silver coins during Dhanteras-Diwali, with demand exceeding supply in a few locations, he said.
For Kolkata-based Senco Gold, exchanges have shot up this Dhanteras. “Consumers have bought bridal jewellery as well as jewellery for personal use through old gold exchanges,” said managing director Suvankar Sen.
Meanwhile, a drop in gold prices this week has brought cheer to jewellers, as they feel this will boost the wedding season demand and total consumption. Gold was trading around ₹1.26 lakh per 10 gm with GST Friday evening, down more than ₹7,900 from the day of Dhanteras (October 18).
“After an extraordinary run, the market needed a pause, a moment to catch its breath, and that’s exactly what we’re seeing now,” said Nigel Green, CEO of global financial advisory firm DeVere Group.
