Shares of gold jewelers are on a steady rise over the past few days thanks to a drop in prices of the yellow metal below ₹60,000 per 10 gm. Inflationary pressures, pent-up demand, and the upcoming wedding season have also aided the trend. 

Shares of key players in the segment such as Kalyan Jewellers, Rajesh Exports, Titan Industries, and Thangamayil Jewellery Ltd, are all on the rise with most of them inching towards their 52-week high levels. 

“While some like Kalyan Jewellers and Thangamayil Jewellers have been buzzing, others like Vaibhav Global and PC Jewllers have failed to make a mark. The overall outlook on the sector remains mixed with selective stocks expected to do well going forward,” says Gaurav Bissa, VP, InCred Equities. 

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Shares of Kalyan Jewellers India Ltd opened the day at ₹147.80, a tad lower than the previous close of ₹148.60. The stock is inching towards its 52-week high of ₹152.80. Thangamayil Jewellery opened the day with a gain of ₹35 at ₹1,539.90. Yesterday, the stock traded at ₹1,504.95. The stock is on a continuous uptick since last month. Shares of biggie Titan Company gained ₹2.50 in the morning trade to ₹3,102.55 -- not far away from the 52-week high of ₹3,113.70.

Global scenario

Domestic spot prices of the precious metal have been fluctuating since the middle of June on the US-China trade war, and rate hike announcements by major central banks. Gold prices are inversely correlated with movement in the US dollar. Strengthening of the US dollar is linked to signs of economic growth leading to lower risk aversion. This leads to lower gold prices, as the metal is considered a haven.

Geopolitical tensions or crises led to higher prices, as gold is considered a safe bet. While geopolitical tensions aid the price movement, volatility and performance of other asset classes such as equities, and higher interest rates affect the prospects of the yellow metal. 

India and China are the key demand drivers of the yellow metal. Annual gold demand surged 18 per cent to 4,741 tonnes during CY2022 on account of robust investment demand. However, the jewellery market posted a dismal performance as higher gold prices, a slowdown in global economic growth, and a demand crunch in China, the largest consumer of gold, weighed on overall gold demand. Global demand stood at 2,086 tonnes during 2022, down three per cent from the 2,148 tonnes registered in CY2021.

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Gold demand from China was impacted by recurrent lockdowns across major cities as the Chinese government implemented a zero-Covid policy. Later, while the policy was reversed abruptly, a spike in infections kept a lid on demand. A rise in gold prices proved to be a further deterrent to the demand. In India, while demand remained soft at the beginning of the calendar year, it recovered as the months progressed. 

Mixed outlook

Anil R, Research Analyst at Geojit Financial Services, told businessline, “The recent decline in gold prices (5.4 per cent from all-time high) can be attributed to a slight reduction in global recession concerns and the strengthening of the dollar. Additionally, with the possibility of an interest rate hike in the US, this trend may persist. According to data from the World Gold Council, Indian gold demand in CY2023 declined by 17 per cent in terms of volume, primarily due to higher prices. Consequently, we anticipate muted retail demand in the short term. It is challenging to determine the day-to-day impact of these factors on stock prices. However, we expect the demand to pick up in India as festival season commences. Titan is our top pick from this sector. Considering the likelihood of muted demand and premium valuation, we have Hold rating on the stock.” 

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