People offload gold as pandemic deepens financial pain
NEW DELHI: Paul Fernandes, a 50-year-old waiter in India, last year took out a loan using his gold as collateral to pay for his children’s education after losing his job on a cruise liner. This year, he is selling his gold jewelry to meet expenses, after failed attempts at starting a home business and finding another job.
“A gold loan is after all a debt that I am taking on,” he said from his hometown in the coastal state of Goa. “Selling my jewelry means I am not obligated to pay someone back along with an additional interest on that.”
With the pandemic pushing millions into poverty or bankruptcy, many Indians are now turning to their last resort: selling their gold jewelry to make ends meet. In rural India, the biggest bullion buyer, a brutal new wave of the virus has had a catastrophic impact on the economy and incomes. With fewer banks around, people in rural areas rely on gold in times of need as it can be easily liquidated.
Gross scrap supplies, which include old gold melted to make new designs, may exceed 215 tons and surge to the highest in nine years if a new wave emerges, he said. For a nation that imports almost all its gold mainly from Switzerland, higher local supply will also limit overseas inflows.
Many Indians who had clawed their way out of poverty face grim job prospects as lockdowns crippled the economy. More than 200 million have gone back to earning less than minimum wage, or $5, a day.
In an initial sign of stress among consumers, Manappuram Finance Ltd., one of the nation’s biggest gold loan providers, auctioned ₹404 crore of gold in the three months through March from loans that turned sour following a sharp drop in prices.
That compares with just ₹8 crore auctioned in the prior nine-month period. The jewelry was sold as Manappuram’s borrowers—typically daily wage earners, small time entrepreneurs, and farmers—couldn’t afford to repay the money.
In the south, the country’s biggest per capita consumer, about 25% more of old gold has been sold to jewelers, according to James Jose, managing director of Kochi-based refiner CGR Metalloys Pvt.
“After the lockdown, the shops are open and you can see very good footfalls in the shops for two reasons: one is purchases in relation to the wedding season and some amount of liquidation for cash,” Jose said by phone.