MUMBAI (Reuters) – Rising gold prices are causing a rush among customers in Asia and the Middle East to sell their old jewelry and coins, leaving displays in jewelry stores dull and impacting sales. As more people cash in their gold, experts warn this could lead to lower imports, which may slow down gold’s price rally.
Spot gold hit a record high of $3,000 per ounce on March 14, continuing to rise in the following weeks, with year-to-date gains surpassing 15%. This surge is driven by global political and financial instability.
The price hike follows a nearly 30% increase in 2024, benefiting scrap gold buyers in markets like Zaveri Bazaar, India’s largest bullion market. Unmesh Patel, a textile trader, sold four 10-gram gold coins for a 25% return after the Indian government reduced import duties on gold. “I decided to sell instead of waiting for even higher prices,” Patel said.
In India, gold prices have surged over 32% since the import duty cut in July, reaching a record high of 89,796 rupees per 10 grams. If prices stay elevated, India’s gold demand could drop by more than 30% in 2025, according to Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA).
“Consumers are struggling to keep up with the price surge, and their budgets aren’t growing,” Kothari said.
Wedding Season Slump
Despite India’s wedding season, jewelers are seeing less than half their usual customer traffic. Many buyers, like Vaishnavi M. from Kerala, are opting to exchange old jewelry rather than buy new pieces. “The prices are so high, it would ruin my wedding budget, so I plan to exchange some of my mother’s old jewelry,” she said.
India’s scrap gold supply reached 114.3 tons last year, and the World Gold Council predicts it will increase in 2025. India imports the majority of its gold, while China, the largest consumer, also imports about two-thirds of its demand.
Middle East Market Dips
Jewelry demand in the Middle East is also softening. A Dubai-based bullion dealer noted that many Indian tourists, who usually shop in Dubai to avoid import taxes, are now holding back on purchases. About 60% of gold demand in the UAE is for jewelry, but when prices are high, consumers tend to buy lighter pieces, said Andrew Naylor, Head of the Middle East and Public Policy at the World Gold Council.
However, despite lower volumes, the value of jewelry purchased last year increased, according to Naylor.
China and Other Asian Markets Struggle
In China, retail gold sales have remained weak into 2024. With added premiums for craftsmanship, many customers are opting for coins and bars rather than jewelry, said Peter Fung, head of dealing at Wing Fung Precious Metals.
Other Asian markets are also seeing a decline in gold jewelry demand, with more people selling their gold or using it as collateral for loans instead of buying new items.
Brian Lan, managing director at GoldSilver Central in Singapore, said several shops in Chinatown have begun selling gold-plated silver, as consumers seek cheaper alternatives. “Some clients bring in old, broken jewelry to liquidate it,” he added.
These trends reflect the growing tension between gold’s cultural significance and its financial value. Analysts predict a weak outlook for jewelry demand, but investment in gold bullion is expected to remain strong.
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