As gold prices hit consecutive highs, jewelers in Asia and the Middle East are facing their showcases losing their luster as customers rush to sell their old jewelry and coins.

If the rush to sell continues, it could ultimately lead to lower imports in major markets, which could moderate gold's rally, retailers and industry experts said.

Spot gold topped $3,000 an ounce for the first time on March 14, and continued to climb last week to take cumulative gains for the year to more than 15%, driven by a powerful combination of political and financial uncertainty.

This astonishing rise follows a nearly 30% increase in 2024 and has spurred increased business for scrap gold buyers often overlooked at Zaveri Bazaar, India's largest bullion market.

Textile trader Unmesh Patel said he had made a profit of more than 25% on the sale of four 10-gram gold coins bought less than seven months ago after the Indian government reduced import tariffs on the metal.

"I decided to sell rather than wait for prices to go even higher," he said.

Domestic gold prices in India have risen by more than 32% since import tariffs were reduced in July, reaching an all-time high of Rs. 89,796 per 10 grams.

"If prices remain so high all year round, India's overall demand could fall by more than 30% by 2025," said Prithviraj Kothari, president of the Indian Bullion and Jewelers Association (IBJA).

"Buyers are finding it hard to keep up with price increases, and their budgets aren't growing either," he added.

WEDDING SEASON UNDER

Although the Indian wedding season is in full swing, jewelers are seeing less than half their usual customer traffic, according to distributors.

Even those who are shopping, like bride-to-be Vaishnavi M., are opting to trade in old jewelry for new to minimize costs.

"The prices are so high that it would completely ruin my wedding budget...the plan is to exchange some of my mother's antique jewelry," said Vaishnavi M. in the southern state of Kerala.

India's scrap gold supply amounted to 114.3 tons last year, a figure that the World Gold Council expects to increase by 2025.

India meets most of its gold needs through imports, while China, the largest consumer, also meets two-thirds of demand through imports.

Jewelry centers in the Middle East are experiencing a similar drop in demand, according to a Dubai-based bullion dealer.

"Many Indian tourists often shop in Dubai to avoid import duties, but even they are reluctant," the trader said.

About 60% of gold demand in the UAE is for jewelry and when prices are high, consumers buy lighter weight products, said Andrew Naylor, Director of Public Policy and Middle East at the World Gold Council.

"However, our data shows that the value of jewelry purchased last year increased, despite lower volumes," he said.

In China, the weak retail demand seen in 2024 continues. As jewelers charge additional prices for craftsmanship, those who only want to own physical gold will buy coins and bullion, said Peter Fung, chief operating officer of Wing Fung Precious Metals.

Other major Asian markets have also seen a drop in demand for gold jewelry, with more sellers than buyers.

Consumers are opting for cheaper jewelry or selling their existing gold or using it as collateral for a loan rather than making new purchases.

Brian Lan, managing director of Singapore-based GoldSilver Central, said about five stores had recently opened in Chinatown selling gold-plated silver.

"We've seen some customers come home and look for unworn or broken jewelry and bring it back to liquidate," Lan added.

These trends highlight the delicate balance between gold's role as a traditional cultural product and its value as a financial asset.

Looking ahead, analysts say the outlook for jewelry demand remains bleak, although bullion investment demand is likely to remain strong.

Rajendra Jadhav in Mumbai, Ashitha Shivaprasad in Bengaluru; Editing by Kavya Balaraman, Veronica Brown and Kirsten Donovan. Reuters