Gold rally fails to damp appetite of jewellery lovers

Khaleej Times

07-03-2025

Gold price rally is likely to continue this year, but it will not dent jewellery sales due to strong demand from central banks, geopolitical instability and inflation fears, according to experts.
Leading gold retailers said soaring prices of yellow metal have not dampened the appetite of jewellery lovers as the sales remained steady, indicating gold's enduring status as a value-appreciating investment. However, there is a demand for diamond or 18k or lower carats due to some seasoned buyers and a growing number of millennial and Gen Z consumers who prefer stylish, versatile designs.
Shamlal Ahamed, Managing Director for International Operations at Malabar Gold and Diamonds, said the yellow metal price is likely to sustain an upward trend this year.
'Predicting short-term gold price movements is challenging, as they are influenced by various so-cial and economic factors. However, historical trends show that gold prices have consistently risen over time, reinforcing its status as a reliable long-term investment,' Ahamed told BTR.
He was of the view that gold has always been a safe haven, protecting wealth against inflation and economic uncertainties. 'As global demand continues to grow, its value is expected to remain strong.'
Gold's rally, which began in late 2024, has seen record high prices within just six weeks since the start of 2025. On February 20, 2025, prices hovered near $2,950.41 per ounce and are expected to hit new all-time high of over $3,200 before stabilising at elevated levels in the coming years, according to UBS gold price outlook.
Goldman Sachs sees the potential for gold to surge to $3,300 per ounce by year-end due to prolonged speculative positioning. The investment bank raised its year-end 2025 gold price forecast to $3,100 per ounce, up from $2,890, citing sustained central bank demand.
'Structurally higher central bank demand will add nine per cent to the gold price by year-end, which combined with a gradual boost to ETF holdings as the funds rate declines,' according to Goldman Sachs estimates.
Growing fears of inflation and fiscal risks could drive speculative positioning and ETF flows higher, while worries about US debt sustainability may encourage central banks, especially those with large US Treasury reserves, to increase their gold purchases, the investment bank added.
About impact of higher gold prices on jewellery sales, Ahamed said a sudden rise in gold prices may lead some jewellery buyers to adopt a wait-and-watch approach, but this hesitation is usually short-lived.
'Consumers eventually adjust to the new prices, recognising that gold's consistent appreciation reinforces its status as a valuable investment. As history has shown, demand for gold always rebounds, as buyers understand that purchasing gold is not just an expense but a smart way to preserve and grow wealth over time,' he said.
Key factors behind rally
John Paul Alukkas, Managing Director, Joyalukkas Group, said gold's outlook for 2025 looks very promising following its record performance in 2024.
'The demand for gold is expected to stay strong due to economic uncertainties, inflation, and the continued appeal of gold as a safe-haven asset. Central banks' increased purchases and rising consumer confidence are also likely to contribute to gold's growth,' Alukkas told BTR .
'In markets like the UAE and India, where gold is a significant part of cultural and economic activity, we are expecting continued demand for jewellery. At Joyalukkas, we are prepared for the ups and downs and our commitment remains to offer high-quality products and choices which we are sure will help us maintain our leadership position in the market.'
In 2025, gold prices seem to be on growth path, driven by a combination of factors, according to Alukkas.
'Global economic uncertainties and inflation concerns will keep gold as the preferred safe-haven asset, attracting investors worldwide. Central banks' ongoing gold purchases further bolster its value.'
Additionally, Alukkas said strong consumer demand for gold jewellery, especially in key markets like India, the UAE, and China, will sustain its popularity. 'As the global economy navigates challenges, gold remains a reliable store of value. Inflation, central bank decisions and the US dollar will the big drivers of gold prices this year,' he said.
Setting new records
Anil Dhanak, Managing Director at Kanz Jewels, said gold has consistently broken all-time highs, and the first quarter of this year has already seen prices hovering close to $3,000 per ounce.
'This upward trend is likely to continue, driven by interest rate cuts and sustained central bank purchases. As inflation concerns persist and geopolitical tensions remain unresolved, gold's appeal as a safe-haven asset will only strengthen,' he said.
About the factors driving gold prices this year, he said the primary driver will be monetary policy decisions mainly the interest rate cuts by the Federal Reserve and geopolitical uncertainties especially regarding the US tariff policies.
'Given the fragile economic environment, investors are expected to continue flocking to gold as a hedge against uncertainty,' he said.
Focus shifting to diamond
Leading jewellery retailers said the buyers shift focus to diamond or 18k or lower carats not only because of bullish gold, but also due to seasoned buyers and a growing number of millennial and Gen Z consumers who prefer stylish, versatile designs.
Ahamed said the demand for lightweight, trendy jewellery that seamlessly complements different outfits has been steadily rising in recent years. This shift is driven by both seasoned buyers and a growing number of millennial and Gen Z consumers who prefer stylish, versatile designs. 'Interestingly, this trend is independent of gold price fluctuations as the average transaction value for gold jewellery has remained stable, proving that consumer interest is driven more by design prefer-ences than by gold rates,' he said.
As gold prices soar, John Paul Alukkas said many customers are diversifying their choices. 'They are preferring to purchase diamonds and 18k or lower-carat gold, which offer a more affordable alternative. This could also mean they are preferring precious jewellery for everyday wear and many more occasions, because overall we don't see a big impact in sales of all types of jewellery,' he said.
'At Joyalukkas, we offer all types of jewellery, whether you're looking to dazzle with a diamond or shine with high-quality gold, at Joyalukkas we offer unmatched beauty, quality, and timeless de-signs that perfectly suit every style.'
Gold delivered strong gains in 2024, rallying by more than 25 per cent and hitting its all-time high. Those gains build on the strength that the precious metal has enjoyed over the past five years, during which time its price has increased by more than 70 per cent. Many analysts value gold for its intrinsic value and its applications in various industries. While analysts have different price targets in mind, the general consensus is that yellow metal will continue to rally in years to come.
'While higher gold prices traditionally dampened jewellery demand, consumer behaviour has evolved. Shoppers today recognise that waiting for gold prices to drop is not always the best strategy. Instead, purchasing based on personal financial readiness has become the norm,' Dhanak said.
Additionally, he said there is a noticeable shift towards lighter weight jewellery pieces, ensuring continued demand despite higher prices.
'Design and aesthetic appeal remain the most important factors in a jewellery purchase. However, diamond jewellery is now seen as a more cost-effective alternative when gold prices rise. Lower-carat gold, such as 18k has also become a popular choice, allowing consumers to balance price and design preference,' he said.
About the challenges for bullion to retain its safe haven status, Dhanak said gold's strong rally has only reinforced its reputation as a safe-haven asset. This perception is unlikely to change unless we see unexpected rate hikes or a sharp economy recovery that drives investors toward higher-yield assets. For now, gold remains a key store of value in times of uncertainty.