The rising gold prices have taken the sheen out of the retail jewellery businesses.

On Monday, the price of yellow metal surged by ₹675 to touch a new high of ₹39,670 per 10 gram. Its steady increase since May has forced the consumers to hold back their purchases. This has resulted in a sharp fall in sales among retailers across the country. They are hoping that the upcoming wedding season (especially in Tamil Nadu, a large gold consuming State) and festivals like Diwali will bring back demand.

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“Jewellery sales have declined by nearly 35 per cent since May when compared with the previous year. This has never happened before. We are hoping for prices to correct a little bit,” said Anantha Padmanaban, Chairman of The All India Gem & Jewellery Domestic Council.

Echoing a similar view, Jayantilal Challani, President of Madras Jewellers and Diamond Merchants Association, said on May 25 the gold price was ₹3,031 per gram but today it is ₹3,730. “I have never seen such an increase in my life time,” he added.

Investors like Indusri Srinath, a software engineer who buys a gram of gold every month, have put on hold the purchase in the last two months. “It is too expensive. I will wait for lower prices to revive the monthly purchase,” she said.

However, Hema Balaji does not have such luxury. She needs to buy jewellery for her son’s wedding due in a few months. People like Indusri constitute a large chunk of the buyers and they have chosen to wait for the prices to correct.

But some people see an opportunity in these circumstances. Exchange of old gold has picked up and customers are able to get more value on their old jewellery than what they had earlier imagined, said TS Kalyanaraman, CMD, Kalyan Jewellers.

There are many factors that have contributed to the run away gold prices. International and domestic developments have forced investors to invest in gold as a safe bet. “Gold price has gone up by nearly 20 per cent since January. In addition, there was a 2.5 per cent duty increase and another 2.5 per cent on rupee depreciation. The overall increase was nearly 25 per cent, which is quite steep. In August alone, there was a 8 per cent increase,” said PR Somasundaram, Managing Director, India, World Gold Council (WGC). He is not surprised that people are postponing purchases.

According to WGC report on ‘India’s Gold Market: Evolution and Innovation’, Indian gold demand is expected to average 850 tonnes to 950 tonnes per annum by 2020 (it is estimated at 760 tonnes now). If the current trend in prices continue, it may take a while to achieve this target.

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