Demand for jewellery down 30%

The surge in gold price to near Rs 32,000 for 10 gm has triggered profit booking in rural markets. “People who bought gold coins or small pieces of jewellery a few months ago are now selling them for cash,” says B.A. Ramesh, founder-member and Joint Managing Director of Thangamayil Jewellery Ltd. The listed entity has 22 retail outlets in tier-II, -III and rural areas in the south of Tamil Nadu.

“People in cities are, however, cautious in either selling or buying,” says Mr Prithviraj Kothari, President of Bombay Bullion Association.

According to Ramesh, at this rate, buyers are a little reluctant to buy as they have to carry piles of currency with them, “as a gold ornament of 24 grams will cost close to Rs 1 lakh”.

However, latent demand is building up, he says, adding “a couple of showers in the weeks to come will surely perk up sentiments in the rural market.”

In major cities, demand for jewellery is down. Many shops in Chennai are relatively less crowded. Scrap sales are currently at 70 per cent. About 60 per cent of them are exchanged for new jewellery, the rest is being sold for cash, says A.K.S. Syed Ahmed, Chief Advisor, Tamil Nadu State Jewellers Federation. Investment purchase is almost nil, he said.

“Buying has dropped 20-30 per cent now than what it was when gold ruled at Rs 30,000 for 10 gm,” said Kothari.

But some are trading old jewellery for new. “There is also sale of scrap gold,” said Kothari.

Retailers also report a 20-30 per cent drop even in footfall compared with two months ago. Many feel that if the trend continues, the third quarter will see at least 20 per cent drop in jewellery consumption from the second quarter.

At 124.8 tonnes, jewellery demand registered a 30 per cent drop in the second quarter (April-June) compared with 180 tonnes in the same period year ago.

Indian consumers are disenchanted by the current price, says a World Gold Council report.

It also attributes the drop in demand to the record high local currency rates, a slowing economy and domestic inflation. Looking at this in a more historical context, demand was 14 per cent below the five-year average of 144.8 tonnes, says the report.

(This article was published on September 16, 2012)
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