Indian jewellers report that approximately 25 percent of gold sales in the country are now driven by the exchange of old jewellery. This surge in sales can be attributed to the rising gold prices, prompting individuals to capitalize on the high value of their jewellery. The World Gold Council predicts that Indians will likely sell a record amount of used jewellery this year.

Despite an overall decline in gold demand, with only 78 tonnes purchased in Q1 2023 compared to last year's 94.2 tonnes, the market witnessed the launch of the first tranche of sovereign gold bonds. The second tranche is scheduled to enter the market in September, offering investors a favorable investment option with a return of 2.50 percent and tax-exempt potential on gold.

PR Somasundaram, Regional CEO India at World Gold Council, shared his perspective on sovereign gold bonds, noting that while they attract individuals who are otherwise uninterested or undecided about physical gold, they do not seem to be leading to a decline in its purchases. He also mentioned the impact of the sudden price surge on consumers, resulting in a softening trend in the second quarter. The possibility of an upturn in demand in the fourth quarter depends on price behavior and a potential decrease in prices.

Amidst the rapid price escalation, individuals in India are seizing the opportunity to exchange their old jewellery for cash or other investments. While the demand for gold has experienced a dip, the introduction of sovereign gold bonds provides an alternative avenue for investment.