Gold Demand in India Sees Temporary Reprieve Amid Geopolitical Uncertainty

India's gold market has experienced a temporary reprieve after a challenging period due to price swings and higher import duties. The 'Adhik Maas' period, which ended on June 15, typically sees a moderation in jewellery purchases as customers defer buying until the period concludes.

However, analysts warn that this recovery is not a full one and is instead a result of pent-up demand from families who had deferred their festive and wedding shopping. The summer wedding season, which began on June 16 and runs until August 15, is expected to support demand, with many booking gold for the upcoming festive season as prices are at a lower level now.

Despite the recent headwinds, prominent retailers such as Joyalukkas Group and Senco Gold & Diamonds have reported an increase in sales, driven by significant pent-up demand. The trend of exchanging old gold jewellery for new purchases has also strengthened further following the import duty hike in mid-May, with some retailers reporting a 10-20% rise in old gold exchange volumes.

Market analysts are urging caution before declaring a full recovery, citing the geopolitical climate and high gold prices as concerns. According to Crisil Ratings, the organised gold jewellery retail sector is expected to see sales volumes decline another 13-15% year-on-year this fiscal after contracting 8% last fiscal.