Gold prices soar: Panic buying and profit-taking grips jewellery markets

Thiruvananthapuram: An extraordinary rush to purchase gold jewellery was witnessed recently following Prime Minister Narendra Modi’s appeal for austerity to mitigate the economic impact of the West Asian conflict. Despite the PM’s call to avoid gold purchases for a year to protect the economy, a notification increasing import duties triggered a massive price hike across the country. In Kerala, the price per sovereign (8 grams) skyrocketed by ₹10,200.

Rumours of impending strict regulations on gold sparked a "buy now" frenzy, with many fearing future scarcity or even higher prices.

Surge in sales

Traders in South India reported heavy footfall, with families advancing purchases even for weddings scheduled as late as November and December.

Import duty hike

The total import duty on gold and silver has been hiked from 6% to 15%. The revised tax structure, effective immediately from midnight of the announcement, is as follows: 

• Basic import duty: 10%
• Agriculture Infrastructure and Development Cess (AIDC): 5%
• Other metals: A 10% duty now applies to platinum and jewellery components such as hooks, clasps and pins.

Impact on Jewellery Stocks

The duty hike led to a sharp decline in the share prices of major players on the NSE:

• Kalyan Jewellers: Down 6% (₹340)
• Senco Gold: Down 3% (₹302)
• Thangamayil Jewellery: Down over 3% (₹3480.20)
• Titan Company: Down 1% (₹3985.10)

Industry response

The All India Gem & Jewellery Domestic Council has sought an urgent meeting with the Prime Minister's Office. The Council suggests long-term solutions, such as incentivising the monetisation of idle gold held in households rather than relying solely on imports.

Economic outlook

With the wedding season running from June to mid-August, the price hike is a major blow to the middle class. While gold is traditionally seen as a "safe haven" during geopolitical instability, the current trend of panic buying—counter-intuitive to the PM's austerity plea—could lead to supply shortages and a potential spike in smuggling in the coming months.