Gold Jewellery Consumption Likely to Dip 9–10% in FY26 Amid Soaring Prices: ICRA Report

India’s domestic gold jewellery consumption is projected to decline by 9–10% in volume terms in FY26, driven largely by a sharp 33% increase in gold prices, according to a report released by ICRA on Thursday. Despite the anticipated volume decline, the value of gold jewellery consumption is expected to grow 12–14% year-on-year, supported by elevated price levels—a trend similar to FY25, when the sector recorded a 28% growth in value.

“Organised large retailers are likely to register 14–16% revenue growth in FY26, buoyed by continued gold price appreciation, expansion of retail footprints, and increased market share from the unorganised sector,” said Jitin Makkar, Senior Vice President and Group Head at ICRA. He added that a higher number of auspicious days in the fiscal year would lend additional support to demand, despite high prices and volume contraction.

While jewellery volumes face downward pressure, demand for gold bars and coins continues to climb. ICRA reported a 17% rise in bar demand and a 25% surge in coin demand over FY24 and FY25, reflecting a growing investor preference for safe-haven assets amid macroeconomic uncertainties and geopolitical tensions. This investment trend is expected to persist in FY26, with bar and coin demand forecast to grow by around 10%, comprising 35% of total gold demand.

ICRA projects an expansion in the operating margin of the gold jewellery sector by 30 basis points, reaching 7.2% in FY26, attributed to scale efficiencies and improved pricing. However, net margin growth will likely remain limited—within 10 basis points—due to rising financing costs. These costs are expected to increase due to elevated Gold Metal Loan (GML) rates and higher working capital borrowings necessitated by high gold prices and aggressive store additions.

Despite the price-driven volume contraction, the sector continues to benefit from stable wedding demand, a strong cultural affinity for gold, and a robust retail presence in both metro and non-metro markets. While FY25 saw volume contractions across much of the organised sector, a few players managed growth by pursuing aggressive store expansion strategies—a trend expected to continue into FY26.

Gold prices are likely to stabilise at current elevated levels, barring any major geopolitical or global financial shocks, the report noted.

(Source: PTI)