“In order to encourage sales through electronic transfer of money, jewellers offer a discount of ~280 per 10 gram on the value of gold ornaments. This means, customers can avail standard gold at ~29,400 per 10 gram when its real market value stands at ~29,680 per 10 gram,” said Kumar Jain, director, Umedmal Tilokchand Zaveri, a bullion dealer and jeweller retailer in the popular Zaveri Bazaar.
Gold coins and bars, however, continue to fetch fair price without discount. But, the growing uncertainty has reduced bullion demand. According to Prithviraj Kothari, managing director of RiddiSiddhi Bullions, jewellers are abstaining from fresh purchases probably on expectations of price fall. “Consumers are cancelling orders that they had placed months ago to honour commitment for wedding gifts. Occasional buying from retail consumers has also remained on hold. The ongoing scenario might yield liquidity problem in medium- to long-term,” said Kothari.
Weak demand has reflected on gold prices, too. Gold price in both Indian rupee and dollar terms has declined sharply over the past 10 days due to disappearances of black money from the system.
“Normally, consumers used to buy bullion and gold with surplus money and they preferred to avoid actual bills especially for bullions. But now, since jewellers demand cheque payment or online transfer of funds which normally remain KYC (know your customer)-compliant, purchases have dried up,” said a bullion dealer from Zaveri Bazaar.
In rupee terms, gold prices have declined by nearly seven per cent to ~29,160 per 10 gram since November 8, when the government announced demonetisation
of high-value bills. However, gold price in London has declined similarly to trade currently at $1,204 an oz. Silver also followed the move to trade currently at ~41,765 a kg.
Jewellery sales, meanwhile, have come down as customers are awaiting import duty cut. Traders and jewellery consumers believe that the Narendra Modi government would cut the import duty on gold to appease jewellers who face harsh action from the income-tax department for selling ornaments with banned currency notes of ~500 and ~1,000 denominations. A school of thought also forecasts luring of customers through duty cut.
“Since the rates for the Goods and Services Tax (GST) have already been finalised for most tradable goods and services, import duty on gold needs to be rationalised to suit customers,” said a senior industry official.
The apex industry body India Bullion and Jewellers Association has demanded that the government keep tax at an affordable level under the GST regime.