Gold’s allure to stay ‘feeble’ in India

Measures to contain pandemic may result in stores remaining shut for longer periods

Demand for gold in India is unlikely to revive before September even as jewellers slowly reopen their stores after the world’s biggest lockdown.

Consumption in the world’s second-biggest user came crashing in the first quarter, hit by high prices and slowing growth. With a more than two-month-long lockdown pushing the economy toward its first contraction in at least four decades and shops closed for most of April and May, sales may be hit further.

While the lockdown is slowly being eased and jewellery stores reopen, buyers are staying away as public transport systems haven’t resumed fully. Only a handful have come to the stores to pick up old orders or the ones bought online during the lockdown, said Shaankar Sen, vice-chairman of the All India Gem And Jewellery Domestic Council.

‘Warm-up’

“June would be a very feeble warm up,” for demand and the big purchases won’t happen before September, Sen said. “We gauge that festival jewellery purchases have been put on hold and any kind of occasion-based purchases are also delayed now.” Sen, who is also the managing director of Senco Gold & Diamonds, said his company has reopened more than 70 per cent of its 110 stores spread across 17 states.

“Customers now prefer to visit stores without their families,” said Ahammed M.P., Chairman of Keralabased Malabar Gold & Diamonds. “They have become extremely cautious.”

Measures to contain the pandemic may result in stores staying shut for longer periods, according to Care Ratings. That will lead to heavy revenue losses for jewellers, stress on profitability, increase in inventory days and the lengthening of operating cycles, which could further damp borrowing abilities in future and create liquidity pressure, it said.