Aarti Kunnur, a middle-class, salaried woman from a western Mumbai suburb, had plans to buy diamond-studded platinum jewellery worth Rs 5 lakh for her sister’s wedding. But she changes her mind and opts to buy diamond-studded gold jewellery.
She attributes her decision to higher making charge, dissimilarity among items due to limited options and narrowing price advantage against perennially preferred gold. Also, diamond-studded gold jewellery looks lustrous and uniform among ornaments.
Many buyers like Aarti have shifted to gold jewellery, as the yellow metal’s price moves in and around the price of platinum.
There’s a visible difference between silver and platinum, but there’s a chance platinum could be mistaken for silver, the cheapest among precious metals. And, consumers like Aarti don’t want to create a silver-like jewellery impression among their relatives. Also, gold is yellow, which anyone can differentiate from other metals, thus creating an impression becomes easy.
Considering the double making charge of platinum jewellery, gold ornaments work out cheaper, as the base prices of both metals have become almost range-bound.
“The demand for platinum ornaments is hardly 15 per cent of the overall jewellery sales, due to limited options available in this segment. The remaining, 85 per cent, continues to be jewellery items made of gold,” said Hemendra Rengre, store manager of Lagu Bandhu, a leading jewellery retailer in Mumbai.
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A couple of months ago when platinum prices were hovering below gold prices, platinum jewellery sales accounted for 25-30 per cent of the total, according to noted jewellers.
Lagu Bandhu charges Rs 700-1,000 per gram for making platinum jewellery, compared to Rs 200-500 in case of gold ornaments. Making charges depend on design and collection of jewellery items. Due to its hardness, making charges for platinum jewellery always remain higher, according to Rengre.
While a majority of jewellery retailers keep some exquisite and trendy gold designs ready in their inventories for showcasing, platinum designs are available largely on paper due to frequent changes in customers’ choice.
Because of limited options in platinum jewellery, buyers are slightly skewed towards gold jewellery. Ornaments like ring, erring, necklace and pendants are available in platinum, but customised designs, including handcrafted, minakari and jadau jewellery, are available in gold.
According to Vijay Jain, chief executive of Orra, a leading jewellery retailer: “Sentiment more than anything works for jewellery demand in India. A couple of years ago, platinum prices were almost three times more than gold prices. Indian consumers continue with that perception. Hence, they simply go for gold jewellery.”
Despite a slow response towards platinum jewellery, the growth in this segment continued to remain higher at around 35 per cent, compared to 15-20 per cent in gold jewellery, Jain said. Buying of platinum jewellery is largely restricted to high-end consumers, against all classes of consumers in case of gold ornaments.
Consumers had turned towards platinum buying in August last year, when the white precious metal was oversold, resulting in a dramatic fall in its prices. The price of platinum fell to $1,732 an oz, which was below the price of gold, $1,746 an oz.
Yesterday, platinum fell below gold to trade at $1,697 an oz, against $1,713.33 an oz of the yellow metal. Platinum is costlier than gold, but is mostly used for industrial purposes. The sharp rise in gold is due to its growing demand as a safe haven. Also, after the US credit downgrade by Standard & Poor’s, gold is seen as virtual currency.
The platinum market size is a little less than a tenth of gold’s. Apart from the metal’s use as a photo catalyst, chemical labs also use it for testing purposes. In 2007-08, it was trading at more than double gold prices internationally. The annual platinum demand is around 10 tonnes in India. This is expected to go up as jewellery made from it is in demand.
Meanwhile, Vaishali Banerjee, country manager India, Platinum Guild International, feels, “Platinum has witnessed sharp growth over the last two years due to several reasons. One is consumers’ familiarisation and knowledge about platinum has grown. We find the belief in platinum is growing stronger. That is why it is now in the consideration set of platinum. They understand and prefer to have high-quality diamond jewellery set in platinum. Platinum provides an opportunity to offer something new to existing customers and helps bring in new customers keen to buy platinum jewellery. While retailers continue to sell platinum jewellery to their existing customers, a large part of the business comes from new customers.”
According to a report by ScotiaMocatta, platinum jewellery in the bridal sector tends to be more price inelastic than the general jewellery sector. In 2010, global jewellery sales dropped 14 per cent, compared to 2009, as prices were 34 per cent higher. As prices in the first 10 months of 2011 were up by 10 per cent, compared to 2010, jewellery demand is likely to have suffered further.