Indian community shuns jewellery for bullion as gold prices soar

India's love affair with gold is well documented, especially with regards to jewellery containing the precious metal.

In 2023, the World Gold Council said India had the world's second-largest market for gold jewellery behind China.

The Indian community in New Zealand is no different, with myriad shops selling gold jewellery located on the main drag through the South Auckland neighbourhood of Papatoetoe.

But with soaring gold prices - the metal is trading at over $7200 per ounce these days compared to less than $4500 per ounce a year back - it seems the community is ditching jewellery in favour of bullion - bars and coins - that are more than 99.5 percent pure.

Gurdeep Singh of Pooja Jewellers in Papatoetoe said the sharp rise in the value of gold over the past 12 months was "unprecedented".

"The price of gold always increases in the long run. When I started my business two decades back, it was $600 per ounce. Now, it's over $7000 - [growth of] about 12 times in 20 years," Gurdeep said.

"[But] what we have seen in the past year is unprecedented. The prices have nearly doubled, which has made the community think whether investing in jewellery is still the right thing to do.

"For example, if you were buying a necklace for $1000 last year, you were paying 15 percent GST which equates to $150. Now, the same necklace will cost you $2000, and your GST will increase to $300.

"[However], if you buy a bullion that is more than 99.5 percent pure, you pay no GST on it. You also save on jewellery making charges, which adds anything between 15 and 20 percent to the price.

"Needless to say, a $2000 investment on a 99.5 percent (or plus) pure gold bullion is a better investment proposition in my opinion."

Many in the Indian community had crunched the numbers, with some - especially investors with surplus cash - lining up to buy bullion and save on 15 percent GST, said Ravindra Singh, owner of Ravi Jewellers in Auckland.

"When we used to book a gold bar, there was never a problem of delivery," Ravindra said. "[Now] there is a shortage as demand for bullion has surged and our order books are full."

Jeweller Mahesh Kumar, director of fashion and jewellery outlet Roopdarshan, said those who needed to buy jewellery for special occasions were still buying it even if their money didn't stretch as far.

"Gold in India is considered auspicious, especially during weddings or festivals such as Diwali," Kumar said.

"If a family wedding is coming up, people will buy gold jewellery no matter what the price is," he said.

"More so, because the metal has always been considered one of the safest investments."

Harish Lodhia, director of Sona Sansaar, had also observed an increase in the number of people interested in investing in gold due to the price hype.

"[However], I believe gold prices are due a correction soon," Lodhia said.

Manu Lambai, manager of Indian jewellery giant Malabar Gold and Diamonds' Auckland showroom, highlighted another factor as to why gold jewellery sales had been impacted.

"I can't comment on the increase in sale of bullion as it is not a major focus of our New Zealand business," Lambai said.

"But in terms of our gold jewellery sales, these have been quite strong overall, even though there is some difference in taxation between India and New Zealand.

"People who go to India often compare our prices here in New Zealand to back in India. While here the GST on gold jewellery is 15 percent, it is just 5 percent in India, which might result in price differential."

Under India's existing tax laws, a sales tax worth 3 percent is levied on gold bullion, while a sales tax worth 5 percent is levied on gold jewellery.

Lodhia believed Indians would continue to invest in gold whether it was jewellery or bullion.

"It's part of our Indian culture," he said.