COVID-19 impact: Indians selling off gold heirlooms to make ends meet

Indians are famously known for their love and collection of gold. The country is, after all, home to the largest holders of the yellow metal. But the pandemic has forced many of them to turn to the last resort and take a step that is an indication of their desperation to make ends meet: sell their gold jewellery.

Rural India is the biggest bullion buyer but the impact of the pandemic has forced them to sell off their gold, stated a report in Bloomberg. There are fewer banks in rural areas and liquidating gold is an easy option.

Chirag Sheth, a consultant at London-based Metals Focus Ltd said that the second wave has likely caused much more financial distress which could lead to more outright sales of gold, unlike in 2020 when consumers chose to take loans against their stash of gold.

Gold scrap supplies that include gold melted to make new designs may surpass 215 tonnes and surge to the highest in nine years in case of a third wave, he said. Higher local supply also indicates that gold inflows would decrease.

Sheth said that people were just about recovering from the financial problems that arose from the first wave when the second wave hit. Again, a third wave is round the corner which means more lockdowns and more job losses. August and September may see increased distress sales of gold.

More than 200 million have gone back to earning less than minimum wage of $5 a day.

Manappuram Finance, one of India’s biggest gold loan providers, auctioned $54 million of gold in three months through March from loans that turned bad. Manappuram’s borrowers could not afford to repay the money.

In Southern India, about 25 per cent more of old gold has been sold to jewellers than usual, according to Kochi-based refiner CGR Metalloys Pvt.

Moreover Indians have been cutting down on gold purchases in the past couple of years due to a weak economy and the virus outbreaks. According to the World Gold Council, gold sales fell to lowest in two decades in 2020.

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