Gold, silver price fall brings relief to jewellery trade after ‘unsustainable’ rally: GJEPC

The jewellery industry is not unhappy about the sharp fall in gold and silver prices, because the earlier price levels had become unsustainable for buyers, said Sabyasachi Ray, Executive Director at the Gem & Jewellery Export Promotion Council (GJEPC).

Amid the brutal sell-off across precious metals, Ray said the recent correction is actually a relief for the trade, after a rally that had moved far beyond fundamentals. The industry, he said, had deliberately stayed away from commenting during the surge because it was “beyond any type of explanation”.

He drew a clear distinction between last year’s steady rise in prices and the recent sharp spike. While earlier gains were supported by investment flows and wider usage, the latest rally was largely speculative. “In recent times, what has happened…it was beyond any type of explanation or any kind of outlook what we can take,” Ray said.

According to him, prices had climbed to levels that were becoming “unsustainable for the buyers of jewellery”. A return to more realistic levels, closer to those seen at the beginning of January, would be positive for the sector. “We should be very happy,” Ray said, referring to the prospect of prices stabilising at lower levels.

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That said, he cautioned that the speed of the fall itself is a concern. “The type of decline in the last three days only…it has its own pitfalls,” Ray warned, adding that such a rapid drop could “spell disaster on certain units” or for those who entered the market near the peak.

Ray also clarified that high prices have not damaged consumer interest in jewellery. Instead, they have only delayed purchases. He said demand remains intact, but expensive gold and silver have led to a “stalling of the buying” as prices rose much faster than incomes. Once prices settle at more reasonable levels, he expects business activity to recover.

From an investment point of view, however, Ray expects a near-term setback. “Investment will suffer a hit in the shorter run because you always invest in this aspiration that it will go up,” he said. He added that investors are currently waiting on the sidelines for clearer signs of a floor before re-entering the market, which he believes could emerge around the levels seen in early January.

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The sell-off has not been limited to gold and silver. A broad wave of profit-taking has also hit other commodities such as platinum, palladium, copper and crude oil, reflecting a wider risk-off mood across the commodity complex.

Despite the current volatility, Ray remains confident about the longer-term investment case for precious metals. “Investments will go on… gold and silver both” will remain good commodities to invest in, he said, stressing that future price movements are likely to be driven by more fundamental demand and supply dynamics rather than speculative excesses.

For the entire interview, watch the accompanying video

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