Experts weigh in on Indians turning to jewellery recycling due to increasing gold prices

Rising gold prices have driven Indians to turn to jewellery recycling to cope with the soaring costs of the precious metal. With gold prices reaching new heights in the past four weeks due to various factors such as a weak macro-economic environment, geopolitical risks, and central banks buying gold, Indians are opting to recycle their old jewellery amidst the festive season. In India, gold prices have been fluctuating in the range of ₹71,500-72,500, leading to a decrease in demand for new gold purchases.

According to Tapan Patel, Fund Manager-Commodities at Tata Asset Management, the record high gold prices may impact retail jewellery demand in India as consumers may hold off on purchasing due to the current price levels. The lower demand could also affect gold imports in the coming months. As a result, the focus has shifted towards recycling ‘old gold’ to meet the demand for gold supply.

Gold recycling plays a significant role in the gold jewellery consumption narrative in India. The country ranks fourth globally in gold recycling, with 11% of its gold supply coming from recycled sources over the last five years. Companies like Malabar Group have witnessed a surge in gold recycling demand from customers as gold prices continue to rise. MP Ahammed, Chairman of Malabar Group, mentioned that 50% of gold has been recycled in their stores in India over the last three months, emphasizing the impact of rising gold prices on customer behavior.

Despite the near-term impact on volume-based demand, Ahammed believes that the long-term outlook for gold jewellery demand remains strong in India. The country’s gold refining sector has also seen significant growth in organized operations, with a notable increase in formal refineries from less than five in 2013 to 33 in 2021. This expansion has led to a substantial rise in the country’s organized gold refining capacity, reflecting the importance of gold recycling in India’s gold market.