JB Insights
Broad-Based Inflation, Precious Metal Costs Are Curbing Jewellery Purchases
Persistent Inflation and Rising Living Costs Are Reducing Households’ Spending Power
Broad-based inflation and high precious metal costs are curbing new gold and jewellery purchases across India, shifting how consumers and retailers approach the festive and wedding season.
Key Trends in India’s Jewellery Market
• Squeezed Disposable Incomes: Persistent inflation and rising living costs are reducing households’ spending power, leading buyers to either postpone purchases or opt for lighter, smaller jewellery pieces.
• Surge in Old Gold Exchanges: Rather than buying fresh gold with new capital, a growing number of consumers are trading in their old family gold to purchase new items. For some jewellers, old gold exchanges now make up a significant share of transactions.
• Jewellers Delaying Wholesale Purchases: Major chains and regional jewellers have slowed down bulk gold acquisitions ahead of peak demand windows like Dhanteras and Diwali, betting that domestic prices will ease further.
• Price and Duty Pressures: Even though gold prices recently saw a short-term correction (with 24-carat gold hovering around ₹1,42,000–₹1,43,000 per 10 grams), an increased import duty of 15% and added making charges/GST keep final retail bills high.
• Rural Demand Headwinds: Weaker rural demand—affected by monsoon disruptions—has further dampened volume growth for physical ornaments, though investment demand via gold ETFs remains relatively resilient.
JB Insights
Sovereign Bond Yields and The Strategic Pivot To Gold
When Government Bond Yields Rise Alongside A High Debt-To-GDP Ratio, Debt Servicing Costs Consume A Larger Share Of The Country’s Revenue. This Forces Central Banks To Adjust Their Reserve Assets Toward Zero-Risk Alternatives Like Gold.
Global finance is currently facing a big problem: government borrowing costs are rising sharply around the world, making it much harder for countries to manage their debt.
Here is what is happening and why it matters:
1. Rising Borrowing Costs: G7 vs. India
Between February and September 2026, government bond yields (the interest rate governments pay to borrow money) rose across major economies. However, some countries handled it better than others:
- G7 Nations (Rich Economies): The average 10-year yield surged by over 1.1 percentage points as investors demanded higher interest to hold government debt.
- India: India’s 10-year government bond yield rose by only 0.4 percentage points over the same period, showing much better stability due to strong domestic demand and steady central bank policy.
2. Historic Debt Levels
Global public debt is projected to pass 100% of global GDP by 2030. The world has not seen public debt this high since the end of World War II in 1945.
- Higher Interest Expenses: Countries must now spend a larger portion of their tax revenue just to pay interest on past loans, leaving less money for public services, infrastructure, and business investments.
- Refinancing Risk: Millions of dollars in old, low-interest bonds are maturing. Governments are forced to replace them with new bonds at much higher interest rates.
3. Why Central Banks Are Buying Gold
Because of these debt risks, foreign central banks are changing how they hold their emergency reserve funds:
- US Treasuries Are Losing Appeal: Big government deficits mean the US is issuing massive amounts of new bonds. This oversupply, combined with high inflation and market swings, makes US debt feel less safe to foreign investors.
- The Pivot to Gold: Central banks are diversifying away from US dollars and buying record amounts of physical gold (over 1,000 metric tons per year). Gold carries zero default risk, cannot be frozen by foreign governments, and holds its value during fiscal crises.
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