Jewellers drop caratage to sustain sales amid soaring gold prices

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With gold prices rising by over 30 percent in the last one year, jewellers such as Titan and Kalyan Jewellers are shifting to offering pieces with lower levels of gold purity, or of lower caratage—including 18-carat and even 9-carat pieces—to sustain consumer interest. The strategy bodes well with the ongoing consumer sentiment, where price-sensitive buyers fret to stretch their budgets for 22-carat gold and are increasingly opting for more studded jewellery rather than plain gold pieces.

The highest level of gold purity is 24 carat, but no jewellery is offered at that level as without the addition of some alloys, the metal is too soft, making it impractical.

On April 16, domestic gold prices hit a lifetime high of Rs 95,000 per 10 grams on commodity exchange MCX. This was driven by nervous investors flocking towards safe-haven assets—gold is considered the best bet to hold its value in volatile times—against the backdrop of rising recession fears, sluggish growth and persistent geopolitical and trade tensions. While the ongoing macro factors did not deter buyers, however, the resultant higher price pushed consumers to switch to lower-carat jewellery and light weight jewellery, and which had lower 'making charges', over traditional 22-carat plain gold pieces.

Announcing its fourth-quarter results, Tata group company Titan pointed out that those who would have bought jewellery that cost Rs 50,000 and below remained on the sidelines. Jewellers themselves are "vacating" these price points—meaning they’re no longer able to offer the same products at these lower price bands, Titan flagged in its post-earnings call.

Instead, specific interest was seen in the studded jewellery category, which includes a higher proportion of gemstones and less gold, making it more affordable.  Both Titan and Kalyan reported double-digit growth in this segment in the three months to March 31, aided by strategic inventory realignment to cater to shifting consumer preferences.

"When it comes to studded, at least 40-45 percent (of the materials used) is taken care of by the stones," said Ramesh Kalyanaraman, executive director, Kalyan Jewellers, adding that this makes it more affordable, making sense to switch to studded jewellery when the prices go.

"The inventory composition—18-carat, 22-carat and the mix of heavyweight, lightweight, and midweight products—is something we keep adjusting whenever there’s a 30 percent-plus increase in gold prices," he added.

However, analysts highlight that consistently high/rising gold prices may dampen volume-led gains in FY26, especially amid heightened competitive intensity.

"There is an early traction and I think more and more customers are going to be open to lower caratage simply because the price point has become quite a bit. On the higher price bands, while there is buyer growth, we are seeing some of the customers actually scaling down the complexity of products they are willing to buy. It means that if earlier they were open to buying a higher making charge product, they are sliding down a bit, but they are still buying a certain quantum of gold and a certain value," said Ajoy Chawla, CEO of Titan's  jewellery division.

Titan's subsidiary Caratlane launched 9-carat jewellery in February amid evolving consumer preferences.

The near-term strategy is to reduce the price points by looking at lower caratage. "If people have been used to buying 18-carat studded, they're also now beginning to get comfortable with 14 (carat)," Chawla told analysts.

However, lower caratage is yet to find acceptance in certain regions in the south, which traditionally shops heavy plain gold jewellery.