Gold prices in India have been on a steady uptrend for months, recently touching record highs driven by the US-China trade tensions, a weakening US dollar and rising investor appetite for safe-haven assets. In the second half of April, domestic gold prices breached the psychologically significant mark of INR100,000 ($1,174) per 10 grams. India is one of the biggest buyers of gold in the world.

Since December 2024, gold prices have surged by INR20,850 per 10 grams, marking a rise of over 26%. Much of the rally has come since early April, following the US administration’s announcement of fresh tariffs, which triggered renewed global market uncertainty, according to Moneycontrol.

Although prices in India have eased a bit due to China exploring the possibility of exempting specific US imports from its 125% tariffs, the prices still remain elevated. US President Donald Trump has also stated that trade talks with China are ongoing, although Beijing has denied that any discussion has taken place.

The sharp spike in gold, however, is likely to weigh on volumes of gold sold. According to a report by Crisil Ratings, the jump in gold prices to record highs may trim the sales volume of organised gold jewellery retailers by 9-11% in the fiscal year 2026. However, with realisations likely to rise sharply compared to last year, revenues are projected to increase by 13–15%.

This follows four consecutive years of more than 20% annual revenue growth, with the industry expanding 2.5 times since fiscal 2021. However, volume growth has been subdued as consumers have purchased smaller quantities amid budget constraints caused by higher prices, according to the Crisil report.

Retailers are increasingly resorting to promotions and discounts to boost sales, especially in Tier 2 and 3 cities. Though this has raised costs, the sale of jewellery at prices above purchase and making charges is expected to drive operating profitability higher by 30-40 basis points year-on-year, aided by inventory gains.

Higher gold prices are also expected to push up working capital borrowings to fund inventory for both existing and new stores. However, leverage will remain manageable and debt protection metrics healthy, thereby supporting the credit profiles of organised retailers, Crisil Ratings noted.

An analysis by Crisil Ratings of 60 gold jewellery retailers, who account for close to a third of the organised sector’s revenue, underscores these trends. In fiscal 2025, organised retailers saw a 4-5% decline in volumes as gold prices soared nearly 25% year-on-year. As of mid-April 2025, prices are already about 20% higher than the average for fiscal 2025.

According to the Crisil report, a modest price increase of 4–5% from current levels would lead to average prices being 22–24% higher year-on-year in fiscal 2026.

Himank Sharma, Director at Crisil Ratings, said the price increase occurred just before the start of the festive and marriage seasons in early April 2025, which limited its immediate impact on retail demand. However, as buyer budgets remain constant, there is an expectation of a reduction in caratage and grammage, impacting volumes. Demand remains relatively supported by last year’s import duty cuts, Sharma added.

Structural reforms such as the Goods and Services Tax and mandatory hallmarking by the Bureau of Indian Standards continue to channel customers towards organised players, sustaining revenue growth momentum. Higher realisations are likely to drive another year of double-digit revenue growth.

Higher gold prices will have two major impacts. Jewellery sold at higher prices than purchase costs is expected to result in inventory gains of 20-30 basis points, pushing operating margins closer to their seven-year average of 7.8-8% in fiscal year 2026. At the same time, debt levels are likely to increase as the cost of replenishing inventory and stocking new stores rises. However, improved revenues and profitability will support cash flow for expansion.

Despite the rise in debt, the capital structure of organised jewellery retailers is expected to remain sound. Higher revenues and operating margins will support debt metrics, with median interest coverage projected to stay strong at over six times in fiscal 2026, according to Gaurav Arora, associate director at Crisil Ratings.

The report said that any major volatility in gold prices, changes in government regulations or import duties and change in consumer sentiment would be major factors to watch out for.