KOCHI: The steep rise in gold prices over the past two years has been a windfall for jewellers who opted against formal hedging mechanisms.
Unlike businesses that shield themselves from price swings by borrowing in gold (gold loans) or using gold derivatives, these jewellers rode the rally unchecked, reaping the benefits of metal price appreciation.
“This approach could have backfired had gold prices moved in the opposite direction. However, in such a scenario, most jewellers would have adjusted their strategy to mitigate losses, at least partially,” said a former CFO of a leading Mumbai-based jewellery brand while talking to businessbenchmark.news
Between January 2023 and December 2024, the price of 24-karat gold in India rose from approximately Rs65,330 to Rs77,913 per 10 grams, marking a 20 per cenrt increase. By March 2025, prices had further climbed to Rs79,200, reflecting an overall 21 per cent surge during the period.
A natural hedge, but not a guarantee
To manage price volatility, some jewellers follow a natural hedge—matching daily gold purchases with sales to maintain stable inventory costs. While this strategy offers some protection, it is not the same as structured hedging, which locks in prices to minimise exposure to sudden swings.
Those who entirely avoided formal hedging during this two-year price surge found themselves at a distinct advantage – enjoying higher margins without incurring hedging costs. By holding gold acquired at significantly lower prices, these jewellers saw their stock appreciate over time, translating into windfall gains.
Making charges: The lifeline of jewellers
Beyond price fluctuations, the jewellery business does not rely on gold price mark-ups for profits. The primary source of earnings comes from making charges – the fee for the craftsmanship involved in designing ornaments.
Since gold prices are largely transparent and standardised, jewellers cannot impose significant mark-ups on the metal itself. Instead, they charge for craftsmanship, with making charges typically ranging from 3 per cent to 30 per cent of an ornament’s value, depending on the complexity of the design and the jeweller’s brand positioning.
“Retail jewellers earn a significantly higher margin than goldsmiths, even though it is the craftsmen who create the jewellery,” said a gold jewellery manufacturer.
The business model varies across jewellers. In many cases, the jeweller provides raw gold to artisans and pays them either a fixed fee per gram or a percentage of the ornament’s value. The jeweller then adds a profit margin on these making charges before selling the finished product.
Premium jewellers command higher making charges due to elaborate designs and brand perception, whereas mass-market retailers operate on thinner margins.
A windfall, indeed
The past two years have been particularly rewarding for jewellers who did not hedge their metal exposure, as rising gold prices directly boosted their revenues. However, this windfall is not guaranteed to last.
If gold prices correct, profitability could come under pressure, especially for those relying on price appreciation rather than operational margins. Ultimately, the industry remains dependent on making charges rather than metal price movements for sustainable earnings – ensuring that craftsmanship, not commodity speculation, remains the true driver of profits.
