India's Ailing Jewelry Business

Indian gold jewelry demand can't keep up with the surge in world Gold Prices right now...

THE SKY-ROCKETING Gold Price for Indian jewelry buyers has shrunk the volume of gold imports into India, reports Rishabh Vora for Commodity Online.

Demand for jewelry was already sluggish in November and December, but it simply vanished in January. However, Gold Investment demand has gained momentum here just like everywhere else as the Gold Price shot up to new all time highs.

The increasing price of yellow metal continues to hurt companies engaged in the jewelry making and trading trade – companies like Gitanjali Gems Ltd and Rajesh Exports Ltd here in Mumbai.

On the contrary, the share price of both these companies has fallen by 85% and more over the last 12 months on expectations that rising Gold Prices would have an adverse impact on their business.

Now this week, Gitanjali Gems – a leader in jewelry exports from India – just reported a fall in its consolidated net profits by 42% in the company's Q3 results. The fall in the profits were the fallout of the contraction in the diamond and jewelry segments of the company during the period.

The company witnessed a decline of 17% in its revenue from Indian operations and a 7.8% decline in its overseas operations during the quarter.

The outlook from here? According to Indian analysts, the current low gold-imports demand is mainly driven by people cashing in and selling their existing inventory or old jewelry. This has come even as Gold Investment demand has increased considerably.

Some Mumbai analysts believe that volatile investment demand driven by Gold ETFs could drive the Indian Gold Price up to a new high of 16000 Rupees per 10 grams in coming months.