Rural India Sells Household
Gold Rises 6.68%
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.