Jewellers’ margins may be affected by surge in gold leasing rates, says media report

Previously ranging between 2-3%, the rates have surged to 6-7% in a month and are expected to rise further

Mumbai: Jewellers are facing a challenge, thanks to the sharp rise in gold leasing rates as global banks rush to secure gold supplies amid trade uncertainties, the Financial Express (FE) reported. This supply crunch has significantly impacted India, one of the world’s largest consumers of the precious metal.

Industry experts report that gold leasing rates, which previously ranged between 2-3%, have surged to 6-7% within a month. This increase is expected to strain the margins of major jewellery firms. Also, due to the Trump administration’s tariff policies, jewellery firms anticipate gold leasing rates to rise further.

“Gold leasing rates have more than doubled due to the trade and tariff wars. This will put pressure on margins. We are monitoring the situation,” Kiran Firodiya, CFO, PNG Jewellers, was quoted as saying by the report. 

Gold leasing rates represent the interest costs jewellers incur when borrowing gold from banks or bullion traders instead of making direct purchases. Indian banks import gold from overseas lenders and provide it as loans to jewellers to support inventory management and working capital needs.

According to the news report, to counter rising costs, jewellers may have to increase making charges on jewellery, though they remain cautious about doing so. With gold prices already soaring, passing on additional costs to consumers could dampen demand. Unlike the festive and wedding season that bolstered sales in the December quarter, the March quarter lacks strong consumption drivers, making price adjustments even more challenging.

Suvankar Sen, Managing Director of Senco Gold & Diamonds, highlighted these concerns, stating that higher gold leasing rates would raise his company’s funding costs by approximately 0.5%. This increase could result in an additional expense of Rs 7-8 crore for the firm in February and March alone, according to the report.

The unpredictable nature of Trump’s trade policies, including delays and exemptions, has further fuelled gold’s appeal as a safe-haven asset, according to industry experts.

The report said Titan, one of India’s largest organized jewellery retailers, would wait until the end of the March quarter before deciding on pricing of jewellery. “The initial indications are that the gold lease rates could go up. We need to wait for a month or two to understand how the supply, and therefore the pricing, will play out,” Vijay Govindarajan, Associate Vice President – Finance at Titan, was quoted as saying.

Retail Jeweller India News