Gold’s rapid rise to near record levels is unnerving some buyers in India, who are holding off on purchases, and worrying jewellers in the country’s vibrant bazaars.

Prices in India, the world’s biggest consumer after China, have rallied in the past month in line with the overseas markets as investors sought safe havens following Russia’s invasion of Ukraine. The country imports almost all the bullion it consumes and costs are rising as the Indian currency trades near a record low.

“Buyers have become very watchful of the price movement and only when a price level has been supported for a while will they return,” said Tanya Rastogi, director at Lucknow-based Lala Jugal Kishore Jewellers. Sales at her company have dropped 25 percent in the past two weeks as the rally scuppered wedding-related jewellery purchases and investment demand has slowed to a “dull crawl,” she said.

Buyers are calling in constantly to check on daily prices, with many asking if the current dip will continue or resume an uptrend, Rastogi said. However, the precious metal remains the “go-to safe haven asset” and consumers will return in the run-up to Akshaya Tritiya, which is considered an auspicious day to buy gold by Hindus, amid geopolitical and inflationary concerns, she added. The festival falls in May this year.

Demand for jewellery comprises the bulk of gold consumption in India and the recent dip in purchases stands out compared with the global trend, where buyers have started hoarding coins and bars. Sales in the country had just started recovering after two bleak years as fears of the pandemic eased. India’s gold imports jumped to the highest level in a decade in 2021 as jewellery purchases almost doubled, according to the World Gold Council.

“Demand for jewellery was good in the first two months of 2022 but March has been slow because of the fluctuation in prices,” said Ashish Pethe, chairman of the All India Gem and Jewellery Domestic Council. “People are staying away and adapting a wait-and-watch mode. Steady prices are the best thing for demand and people are waiting on the sidelines.”

Benchmark gold futures in India have eased nearly 7 percent since rallying to as high as 55,558 rupees ($725) per 10 grams last week, just short of a record hit in August 2020. They were trading at 51,867 rupees on Tuesday at 2:25 pm local time. Still, prices are above the comfort level of customers and demand may only revive in April ahead of some festivals, Pethe said.

High prices have hurt the near-term demand for gold jewellery during the ongoing wedding season, Ahammed M.P., chairman of Kerala-based Malabar Gold & Diamonds said last week. While a section of buyers are able to absorb the increase and are sticking to their pre-determined plans, “a number of families with limited budgets are adjusting their spending instead of postponing the marriage.”

By Swansy Afonso

Learn more:

The Battle for China’s $100 Billion Jewellery Market

International brands, domestic giants and unbranded jewellers are vying for a slice of China’s jewellery market, which is poised for double-digit growth.