Curbs on gold hit jewellers as demand picks up

The sharp decline in gold imports has led to an acute shortage of the precious metal in the market and jewellers claim they are being forced to pay a premium of Rs 2,000 - Rs 2,500 per 10 gm over the spot price for purchases to meet the increase in consumer demand as the festive season has kicked in.

Kumar Jain, vice-president, Mumbai Jewellers Association, told Mail Today that while the spot price of gold has been around Rs 30,300 per 10 gm, importers are charging a premium of Rs 2,000- Rs 2,500 per 10 gm and gold is not available for less than Rs 32,200 per 10 gm.

According to Ketan Shroff, director, Pentagold Private Ltd, "There is currently a premium of $100 an ounce over the spot price of gold and all those who have stocks are benefiting. The premium works out to a little over Rs 2,000 per 10 gm." Jain said that with the government clamping down on imports, inward shipment of gold was reduced to a mere 5- 10 tonnes for two months until mid- September.

"This is far short of the 80 tonnes per month on average, which was being imported before the government introduced the restrictions.

Therefore, the shortage was inevitable," he explained.

Until now, jewellers were managing with recycled gold coming into the market, but with the festive season setting in and the wedding season to follow, the demand is shooting up, Jain added. "Beginning with Dhanteras on November 1, there are as many as 70 auspicious days between November and July when Indians increase gold purchases and the high prices will impose a crushing burden on consumers." Jain also expressed the concern that this would lead to increased smuggling and " the number 2 stuff would flow into the market". With the increase in customs duty on gold to 10 per cent and the quantitative restrictions linking imports of the precious metal to exports of jewellery, the domestic price of gold is much higher than international prices. However, the flip side is that this has made smuggling of gold a lucrative proposition for unscrupulous elements out to make a fast buck.

Senior government officials admit that gold smuggling is on the rise at all international airports ever since the import curbs kicked in. But they see this menace "as something that can be managed".

Courtesy: Mail Today