Ru­ral In­dia Sells House­hold

Gold Rises 6.68%

The Economic Times - - Finance & Commodities - Su­tanuka.Ghosal@ times­group.com

Kolkata: The vol­ume of old gold be­ing re­cy­cled in tier-2 and tier-3 cities has risen 50% since Jan­uary. A price hike of 6.68% in gold since Jan­uary and low ac­cess to dig­i­tal trans­ac­tions are en­cour­ag­ing peo­ple to re­cy­cle their old gold in these ar­eas. Jew­ellers said peo­ple are liq­ui­dat­ing gold to take ad­van­tage of the price rise, es­pe­cially dur­ing the wed­ding sea­son. Gold price has risen from .₹ 27,570 per 10 gm on Jan­uary 1 to .₹ 29,400 per 10 gm.

“Peo­ple liv­ing in smaller towns are re­cy­cling gold to meet the house­hold de­mand. In these ar­eas, the dig­i­tal trans­ac­tion fa­cil­i­ties are not ad­e­quate to help them pur­chase gold. Most of them are not used to such trans­ac­tions. And they do not want to give away the cash in hand. All these fac­tors are forc­ing them to re­cy­cle old gold,” said Nitin Khan­del­wal, chair­man, All In­dia Gem & Jew­ellery Trade Fed­er­a­tion.

World Gold Coun­cil es­ti­mates that 89.6 tonnes of gold was re­cy­cled in 2016 com­pared to 80.2 tonnes in 2015. “The gov­ern­ment should come up with a re­cy­cled gold pol­icy which will give a di­rec- tion to peo­ple who are will­ing to off­load an­ces­tral gold,” said Suren­dra Me­hta, na­tional sec­re­tary, In­dia Bul­lion & Jew­ellers As­so­ci­a­tion (IBJA). Nearly 25,000 tonnes of idle gold are locked up in In­dian house­holds. Sau­rabh Gadgil, man­ag­ing di­rec­tor, PNG Jew­ellers, said peo­ple are en­cash­ing gold to take ad­van­tage of the ris­ing prices. “Our stores in Au­rangabad, Nanded, San­gli-Kol­ha­pur, Jalna and Vi­darbha are wit­ness­ing heavy flow of re­cy­cled gold. There is also a strong sen­ti­ment in the mar­ket that gold prices will shoot up go­ing ahead,” he said. WGC ex­pects this year’s gold de­mand to be 650-750 tonnes due to the in­tro­duc- tion of the goods and ser­vices tax (GST) cou­pled with grad­ual adap­ta­tion to pre­vi­ous pol­icy changes.

The share of smug­gled gold has de­clined to 17% in 2016 from 20% in 2015 due to the liq­uid­ity cri­sis fol­low­ing de­mon­eti­sa­tion of high-value cur­rency notes in Novem­ber.

“Long-term prospects look bullish for gold de­mand in In­dia with an av­er­age 850950 tonnes. For gold to re­main in the fi­nan­cial sys­tem, the gov­ern­ment needs to keep GST rate (along with im­port duty) sub­stan­tially lower than the pre­vail­ing duty of around 13%,” said So­ma­sun­daram PR, man­ag­ing di­rec­tor (In­dia), WGC.

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