Gold prices have been on a tear, hitting an all-time high on 7 October after rising nearly 20% over the past three months. Shares of companies involved in all parts of the gold supply chain, from mining to jewellery retail, have soared. For jewellery companies this also means dealing with higher input costs, that too in the early days of the festive season, their most important quarter.
Gold typically does well at times of geopolitical uncertainty, and there’s plenty of that to go around right now, from the war in Ukraine to US President Donald Trump’s ever-changing tariffs.
Investors typically turn to gold as a safe haven in times like these, until global markets and politics reach calmer waters. The most recent surge in international gold prices was driven by the the US political deadlock and government shutdown.
Flight to safety
A bigger concern this year has been US monetary policy. America’s inward turn—as indicated by rapidly changing tariffs on key trading partners—has raised questions in international markets about the long-term viability of the US dollar as the global reserve currency. In line with these concerns, central banks, among the biggest buyers of gold worldwide, have been stocking up on it, causing prices to shoot up 45% since the start of 2025.
Central banks aren’t alone in this. Investors of all stripes have been participated in the gold rush over the past year, some because of concerns around the US dollar but most because of the sparkling returns it has delivered. The fact that there currently is no viable alternative to the US dollar as the global reserve currency only makes gold more attractive.
The other big driver of international gold prices is gold exchange-traded funds (ETFs), which have become big players in global markets.
Festive glitter
In India the festive season around Diwali, which overlaps with the third quarter of the financial year (Oct-Dec), is a major driver of gold prices.
An analysis of quarterly data from 28 listed companies in the jewellery sector showed both sales and profits see a bump in Q3. In 9 of the past 10 financial years, the third quarter has brought in more than 25% of their sales and profits. During the covid-19 pandemic, Q3 was even more important than usual for the sector.
Demand dampener
A weak Diwali can thus hurt such a company’s annual performance far more than those in other sectors. Expect jewellery companies to be balanced on a knife edge this Diwali. On the one hand, sharp jumps in gold prices can lead to higher margins for companies in the sector. But rising gold prices can also dampen demand, especially at times like these, when gold is skyrocketing. Even with sweeteners from companies, prices may be too high for consumers to handle.
There was a time when consumer demand from countries like India and China was big enough to move global prices. But the big drivers of gold prices this year have been central banks and gold funds, adding a new dimension to the complex interplay.
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