By News18,Varun Yadav

Copyright news18

The sharp surge in gold prices has lured investors to reconsider investment in listed jewellery companies that appear stronger on paper, with reported revenues swelling and inventories reflecting higher valuations, in the past two quarters.

However, an industry insider cautions that much of this growth is illusory. “Inventory in stock is sitting on paper profits, while actual profitability from operations remains much thinner,” says business analyst and industry veteran Prem Soni.

Turnover Up, Volumes Down

The mismatch is stark: while turnover has surged, volume growth has declined and core operating margins have thinned. Higher gold prices artificially inflate revenues, but the actual number of jewellery pieces sold is stagnating or shrinking.

This trend creates a risk for investors who focus only on headline numbers. “Investors chasing only top-line growth might be overvaluing these companies,” Soni warns.

Jewellery Firms Acting as Gold Price Proxies

Analysts note that jewellery firms are increasingly behaving like proxies for gold price movements rather than pure consumer businesses. When gold prices rise, turnover swells; when prices fall, balance sheets contract.

The true strength of these companies lies not in commodity price swings but in labour charges, design capabilities, and sustained volume sales. “The actual moat is in labour margins and volumes, not in price fluctuations,” says Soni.

I come from a gold jewellery business family. This is the WORST Diwali season we’ve seen in 10 years karigars saying no work, no money.
Yet on paper, listed jewellery companies show record growth.
Here’s the hidden truth ??
— Prem Soni (@ValueWithPrem) September 24, 2025

What Investors Should Watch

Despite the record results being reported, Soni urges investors to dig deeper into earnings quality. Key metrics to track include:

Volume of jewellery sold
Trends in labour margins
Separation of inventory gains from operational growth

Without these, investors may mistake commodity-driven inflation in turnover for sustainable business expansion.

The Bottom Line

While gold may continue to shine, jewellery business margins are steadily shrinking. Only strong brands with operational efficiency and consumer trust are likely to endure. For investors, the lesson is clear: don’t confuse commodity-led balance sheet growth with real, sustainable value creation, Soni added.