Titan Says Gold Price Swings, Not Macros, Curb Jewelry Demand

Gold rate volatility — not India's broader economy — is the biggest drag on Titan Company's jewelry business right now, according to Managing Director Ajoy Chawla.

Speaking in an exclusive conversation with BTVI's Menaka Doshi, Chawla drew a sharp line between macroeconomic conditions, which he described as manageable, and the price swings that have kept traditional gold buyers on the sidelines.

"I would say the economic challenges are not too bad. I think the macros have played out reasonably okay," Chawla said. "The challenges are coming on account of gold rate volatility."

Buyers sit on the fence

Gold prices have swung sharply — rising, then correcting — and remain well above levels seen in the previous two years, Chawla noted. That uncertainty has produced a class of hesitant customers.

"Whenever you see this volatility, many customers tend to be a little fence sitters," he said. "People are unsure whether government will once again cut customs duty or whether there is going to be a further correction thanks to whatever is happening in the US with the Fed. So that uncertainty, people tend to wait."

The timing compounds the problem. This is a seasonally weak quarter for gold jewelry purchases, with weddings and festive demand concentrated in the second half of the fiscal year, so buyers have little urgency to act now.

The picture differs sharply by product category. Plain gold jewelry is seeing unstable buyer growth — a measure that includes new customers entering Titan's stores. Studded jewelry, by contrast, is performing well.

"On studded, I think it's been quite good and we continue to see fairly decent, healthy buyer growths as well as overall growths," Chawla said. "There is growth nevertheless, but when I'm saying unstable is to do with buyers."

The 75,000-rupee floor

The affordability math has shifted decisively against the everyday gold customer. Chawla laid out the arithmetic: India's domestic gold price reflects the dollar, international prices, and import duties — and all three have pushed entry-level purchases out of reach.

"It's very difficult for many people to buy into gold jewelry if they don't have a minimum 75,000, 80,000, 100,000 rupees in their pocket because anything which is three, four grams also takes it beyond that," he said.

The customers most affected are the traditional, everyday gold buyers — purchasers of machine-made bangles, small rings, and small earrings who buy partly for adornment and partly for gold's investment value and perceived safety. Upscale, self-expressive, and occasion-led buyers are largely unaffected.

Titan is responding with lighter-weight products to bring price-sensitive customers back, but Chawla acknowledged the limits of that strategy: "Beyond a point, it has an impact. Below 50,000 in gold, the catalog gets vacated very easily."

Duty cut speculation

Chawla addressed the customs duty question directly — and rejected the idea that a duty cut would automatically trigger a demand surge. He pointed to two competing schools of thought among customers: one expects gold prices to keep climbing; the other expects a correction if the government reduces import duties to combat smuggling.

"There's been a lot of smuggling of gold which has gone up in the country. I don't have a figure around it, but all I know is that the MCX is at a discount with the LBMA gold rate. And clearly there's a lot of gold coming in in some form," Chawla said.

He argued the government raised duties to manage balance-of-payments pressures but is likely aware the situation is unsustainable. "At some stage they may need to bring it down. Now, that's the big piece as to when — and customers then will keep guessing," he said.

Monsoon risk deferred

On rural demand, Chawla flagged a delayed but real risk. The El Niño effect and an unpredictable monsoon — with both excesses and shortfalls in rainfall — will eventually hit rural purchasing power, but the impact should surface in the third and fourth quarters rather than now.

Current proxy indicators offer some comfort. "So far, at least from whatever I'm seeing from other surrogates in rural, whether it is motorcycles or other typical categories, they have not yet seen it," he said, before adding a caveat: "It may throw up. I can't rule it out."

For Titan, the near-term calculus is straightforward: studded jewelry and occasion-led demand can carry growth through a volatile stretch, but a sustained recovery in plain gold volumes likely hinges on price stability and clarity on customs duty — neither of which the company controls.