Gold ETFs or jewellery stocks: Where should investors place festive bets?

Analysts see a clearer opportunity in organised jewellery retailers ahead of the festive season, even as they recommend gold exchange-traded funds (ETFs) for investors seeking direct exposure to the precious metal over the long term.

Both gold ETFs and jewellery stocks offer exposure to the gold theme, but their investment drivers differ. Gold ETFs track domestic gold prices and provide relatively direct exposure to the metal, generally through physical gold holdings. 

Jewellery companies such as Titan Company and Kalyan Jewellers India, by contrast, are consumer-facing businesses whose stock performance depends not only on gold prices but also on sales volumes, festive demand, margins, inventory management and market-share gains.

Harsh Thakkar, equity research analyst at SAMCO Securities, said the better festive opportunity lies in organised jewellers rather than the metal itself. “Q2 business updates from leading listed jewellers were strong, with revenue growth of roughly 20–30% and healthy same-store sales. With Dhanteras on November 6, part of festive demand shifts into the December quarter, so Q3 numbers should look healthy,” said Thakkar.

Vaqarjaved Khan, senior fundamental analyst at Angel One, said that gold is still about 20 per cent below its January peak and consolidating near $4,400 an ounce, so it is no longer the obvious festive bet. The sharper opportunity, he said, lies in organised jewellery retail. “I would focus on quality franchises with visible same-store growth rather than smaller names rallying on festive headlines.” he noted.

But that doesn’t mean analysts do not see a case for gold ETFs in portfolios. Since gold’s role is to protect a portfolio when equities, the currency or geopolitics go wrong, it does not require a perfect entry price. “Treat gold as a portfolio allocation, not a trade,” according to Thakkar, who recommends a 10–15% allocation built gradually through gold ETFs or SIPs over 6–12 months. 

Jewellery stocks, according to him, need a different approach: they are consumption businesses, not gold proxies. Buy on corrections, size positions conservatively and favour companies with strong balance sheets and hedged inventory, since rising gold prices can flatter revenue but squeeze margins, the SAMCO analyst recommended. 

According to Khan, investors should also check overlap, because gold ETFs, jewellers and gold-loan NBFCs together add up to far more gold exposure than most investors realise.

Overall, the outlook for gold remains bullish. Vinit Bolinjkar, head of research at Ventura, said gold’s price action at various technical support levels is commendable despite facing near-term headwinds from rising oil prices, geopolitical tensions and concerns about sticky inflation which pushed the US Treasury yields, increasing the opportunity cost of holding non-yielding gold. Despite these short-term headwinds, he finds the longer-term demand outlook remains supportive.   

“One can consider accumulating gold gradually during price corrections at $4100 to $4200 per ounce rather than chasing rallies or deploying their entire allocation at once or at later confirmation stage,” Bolinjkar said.