Soaring Leasing Costs Squeeze Margins:Gold leasing rates have skyrocketed from 2-3% a month ago to 6-7% now, putting intense pressure on jewellers' margins. This sharp rise is primarily driven by tariff concerns from the Trump administration, which has led global banks to stockpile gold. As a result, India—one of the world’s largest gold consumers—is facing a supply crunch, forcing leasing rates higher.
Why Are Gold Leasing Rates Rising?
Gold leasing rates refer to the interest charged on leased gold, which jewellers obtain from overseas banks via local lenders. Leasing helps jewellers manage inventory without significant upfront capital. However, the recent spike in rates means that the cost of doing business has risen sharply.
Kiran Firodia, CFO of PNG Jewellers, highlighted that leasing rates have more than doubled within a month, leading to major cost pressures.
Jewellers Stuck Between Rising Costs & Price-Sensitive Consumers:To offset rising costs, jewellers may be forced to hike making charges. However, with gold prices already soaring—up 8% on the MCX in the past month—passing on additional costs to consumers could impact demand.
Unlike December, which benefits from festive and wedding sales, March lacks major seasonal demand, making it harder for jewellers to absorb higher costs. Savankar Sen, MD of Senco Gold & Diamonds, noted that the increased leasing rates could cost his company ₹7-8 crore in additional funding expenses for February and March.
Gold Prices Surge: What’s Next?
Gold prices on the MCX (Multi Commodity Exchange) have jumped from ₹78,872 per 10 grams on January 17 to ₹84,923 on February 17, 2025.
This rally is driven by global economic uncertainties, volatile U.S. trade policies, and gold’s status as a safe-haven asset. Experts warn that leasing rates could rise even further, adding more financial strain on jewellers.
Vijay Govindarajan, Associate VP - Finance at Titan, stated, “We need to wait a month or two to see how supply and pricing trends play out.”
For now, jewellers must navigate a delicate balance between rising costs and maintaining affordability for consumers.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial advice. Investors and businesses are advised to conduct their own research and consult professionals before making financial decisions. Sensexnifty.com is not responsible for any financial losses incurred based on this article.