Gold Price Rally Reshapes India's Jewellery Industry, Straining Small Players
India's jewellery sector is grappling with intense pressure as a sharp and sustained rise in gold prices dramatically alters consumer purchasing behavior. Over the past year, gold prices have skyrocketed by more than 80%, driven by geopolitical tensions and tariff-related uncertainties. This surge is compressing profit margins at a time when sales volumes are already slowing, creating a challenging environment for businesses across the board.
Volumes Decline as Margins Shrink
Gold jewellery volumes have taken a significant hit in recent months, though this is not always evident in sales figures due to higher gold values. A report by the World Gold Council revealed that India's jewellery demand fell 24% year-on-year to 430.5 tonnes in 2025, even as the total value of sales reached a record $49 billion. Overall gold consumption in the country declined by 11% during the same period.
Smaller jewellers, particularly in Mumbai's famed Zaveri Bazaar, report a 20-30% squeeze in margins. Raju Solanki, owner of Zaveri Kapoorchand Lalchand, noted, "If I make a rough guess, at least 75% of the volumes have been hit. In fact, many are making losses." This sentiment is echoed across the industry, with demand becoming more selective rather than entirely absent. Consumers are increasingly opting for lower gram weight pieces or exchanging old gold instead of making fresh purchases.
Big Brands Innovate, Small Traders Struggle
While established players like Titan and Caratlane are navigating the crisis through innovation and product diversification, smaller jewellers are bearing the brunt of the downturn. Larger retailers benefit from stronger inventory management, transparent pricing, and deeper financial reserves, allowing them to protect margins despite lower volumes. In contrast, small local shops face severe cash constraints and have resorted to cost-cutting measures, including employee layoffs, to stay afloat.
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions and president of the India Bullion and Jewellers Association, explained, "Organised retailers have managed the transition better than unorganised players due to stronger inventory management and transparent pricing." Consumers are now favoring big, reputable chains for their trustworthiness, especially for high-value and occasional purchases.
Shifts in Consumer Preferences and Gifting Collapse
The gifting segment, once a major revenue driver for jewellery companies, has nearly evaporated. Solanki highlighted, "Gold, in fact silver too, has become unaffordable for gifting purposes. Earlier, 80% of our business used to come from the gifting segment, which has now absolutely evaporated." In response, retailers are innovating by offering more affordable options, such as lower purity gold jewellery. Customers are turning to 18 or even 9 karat variants, prioritizing the status symbol of owning gold over purity levels.
Arthi Ramalingam, founder and CEO of online jewellery marketplace Eternz, observed, "People now don't necessarily look if it's a 9 carat or 18 carat jewellery, as long as it's gold, it's fine. What matters is the status symbol." This shift is forcing smaller jewellers to adapt by importing new molds and introducing lower-priced products, though financial limitations hinder their ability to compete effectively.
Stock Market Reflections and Tax Burdens
The industry's struggles are reflected in stock prices of listed entities. Since April 2025, when US President Donald Trump announced reciprocal tariffs, Kalyan Jewellers India has fallen around 19%, while other major players like PN Gadgil Jewellers, Rajesh Exports, and PC Jewellers have seen declines of 6-23%. In contrast, more diversified companies like Titan have risen 35%, and Senco Gold has gained around 23%, though it experienced a significant crash earlier in 2025.
Sluggish demand has led to higher unsold inventories, increasing the tax burden on smaller jewellers. Companies are taxed based on inventory value, and with stocks piling up, taxes have soared despite slow sales. Solanki added, "I know people who paid as much taxes as they had earned last year. Even the bigger shops are sweating now." Additionally, jewellery companies are offering higher discounts on gold and making charges to attract customers, further squeezing margins.
The Outliers: Diversification and Innovation
Larger conglomerates like Titan, Tata's Caratlane, and Reliance Industries' Reliance Jewels are better positioned to weather the storm. Titan, for instance, boasts a diversified portfolio including Tanishq, Mia, and Zoya jewellery brands, along with watches and eyewear, allowing it to mitigate stress in any single segment. These companies have the resources to quickly innovate and launch new products tailored to shifting consumer trends.
In contrast, traditional jewellers with limited product ranges have been slower to adapt, contributing to their stock price declines. The entire industry stands at a critical juncture, with gold prices unlikely to slow down soon. While established players may remain stable, the fate of smaller jewellers hangs in the balance as they navigate mounting challenges to stay afloat.
