"Currently everybody is bullish. But if prices go back above $850 an ounce, it (good demand) could be difficult," said C K Venkatraman, Chief Operating Officer of the jewellery division of Titan, which operates one of the largest jewellery chains.
Titan's jewellery division owns 137 stores under the premium Tanishq brand and Gold Plus, largely a rural and semi urban chain. Jewellery sales contributed approximately 40 per cent to Titan's bottomline last year.
On Thursday, overseas gold was at $833 an ounce, down around 19 per cent from an all-time high struck in mid March.
India's demand for gold revived after mostly poor sales earlier as prices broke below a key psychological level of Rs 13,000 per 10 grams late last month, after touching an all-time high of Rs 13,764 per 10 grams on July 15.
Demand gathered momentum after the next psychological level Rs 12,000 -- gave way early this month.
On Thursday, HDFC Bank quoted gold at Rs 11,936.
Venkatraman said soaring gold prices in the first half of the year, coupled with inflation at multi-year highs, had subdued the appetite of the buyers, but not in a big way. "Bearish news has a psychological impact and people feel poorer, but incomes have also gone up," he said.
In January to June, India's demand for gold fell 47 per cent to 263.5 tonnes, figures from World Gold Council showed.
Though Venkatraman did not say how badly Tanishq was affected by the poor demand for gold this year, he said the jewellery chain had performed better than the industry.
"It is because our customer base is affluent and design conscious and therefore immune to prices," he said.
The fear of spurious gold turned more consumers to branded jewellers and the firm's new stores also helped, he added.
Tanishq currently has a 3 per cent share of the approximately Rs 700 billion gold and diamond jewellery market, he said.
"In the medium term we see our share going to 5 per cent," he said, without specifying the period. This would be on the back of growing demand for gold and marketing initiatives, he said.
"We are certainly betting on the industry. It is a product so deeply routed in the consumer psyche, that demand has to go no where, but up."
In the current fiscal year, the company opened 12 new stores and more are on the anvil.
"We are going to be opening many more stores as there are so many more cities and towns to be covered," he said, without specifying numbers.
But with more growth, it also faces more competition specially from large corporate players eager to wean customers away from the traditional family jewellers with the appeal of their brand names.
Earlier in 2008, Reliance Jewels, a division of Reliance Retail Ltd, commenced gold jewellery retail operations with a few stores and a target of 300 stores in the next three years.
Rajesh Exports Ltd, a gold jewellery exporter, also has expansion plans for the local market, with 35 stores operational in a span of around a year.
"There is space for everyone. Our competitors would not need to grow at our expense," Venkatraman said, adding national jewellery chains would dominate in 10 to 15 years from now.