'Buyers opting for lighter, more affordable pieces amid rising gold prices'

The increase in gold prices, especially during the festive season, has led to a shift in customer behaviour, as the focus now is more on lighter, more affordable pieces. Aditya Modak, CFO & COO of P N Gadgil & Sons, in an interview with Ojasvi Gupta, notes that the recent duty cuts had led to a temporary drop in the prices of the yellow metal. He also highlights the limited use of AI in the jewellery sector. Edited excerpts:

How are luxury jewellery brands impacted due to recent duty cuts in gold?

The reduction in duty on gold, which decreased rates by about 9%, caused a temporary surge in demand. This significant unusual drop in gold prices led to a noticeable increase in gold jewellery purchases for a few months. However, this effect was short-lived, as international gold prices changed. While the initial surge in demand benefited luxury jewellery brands by increasing sales, the prices have now returned to their previous levels.

 

Is there any shift in customer behaviour, especially during the festive season?

Despite the increase in gold prices, the enduring appeal of gold during festive seasons and weddings remains strong. However, instead of investing in traditional heavy gold pieces, many customers opt for lighter, more affordable options, such as 14-carat or 18-carat gold jewellery. Silver jewellery is also in growing interest as a more budget-friendly alternative. Buyers are still purchasing gold because they anticipate that prices might continue to rise, so they prefer to secure gold now rather than waiting for a potential drop.

Has gold ETFs and sovereign bonds impacted jewellery sales?

The impact of gold ETFs and sovereign bonds on physical gold sales has been relatively less. Physical gold continues to hold strong cultural significance, especially for jewellery buyers. About 20 per cent of sales at jewellery shops come from bullion purchases, with most of which eventually being converted into jewellery. Only 1-2 per cent of total turnover is purely investment-focused gold that remains in its raw form. Therefore, while ETFs and sovereign bonds have made gold more accessible to a broader range of investors, they haven’t significantly disrupted the demand for physical gold in the jewellery sector.

How much is Artificial Intelligence integrated in the jewellery business?

The jewellery business is not yet fully utilising Artificial Intelligence (AI), especially in retail. However, Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems play critical roles. These systems help manage inventory, track sales trends, and understand customer preferences. We have internal systems that capture buyer behaviour and trends, but the business has no large-scale AI integration yet. ERP systems are evolving with built-in business intelligence tools, which help analyse sales data without needing external AI or machine learning solutions. AI may have potential applications in manufacturing, but for now, the focus is more on traditional retail systems.

Do cultural and religious factors influence gold demand?

Cultural and religious beliefs significantly influence the demand for gold during festive periods. In the Hindu calendar, specific auspicious days, including Gudi Padwa and Akshaya Tritiya, hold great importance, driving gold purchases during these periods.