NEW DELHI: Deliveries of old gold jewellery and coins, which usually come out in the market when investors take profits, have been thin in India as most believe bullion prices will keep rising even after hitting new peaks nearly every week.
This is different from March, when spot gold initially broke above $3,000 an ounce and retail buyers scrambled to sell their holdings, leading to a surge in scrap supply.
“Indians now think gold prices are going to increase even more, that’s why they’re deciding to keep their assets rather than selling them at a profit,” James Jose, managing director at refiner CGR Metalloys said on the sidelines of the India Gold Conference in New Delhi.
Record gold prices in India unlock scrap supply
Domestic gold prices, which reached a record 110,666 rupees ($1,260.94) for 10 grams earlier this week, have appreciated 42% so far this year, after a 21% rise last year.
Scrap availability usually increases when prices rise too steeply too fast, as happened with prices over the last few months, according to Harshad Ajmera of wholesaler JJ Gold House in Kolkata.
“Today, consumers believe prices may even hit 125,000 rupees, so they are keeping their gold rather than selling,” he said.
While increasing prices have rendered new jewellery out of the reach of many consumers, they are increasingly trading in old jewellery for new ones, said Amit Modak, managing director of PN Gadgil and Sons, a Pune jeweller.
While increasing prices have rendered new jewellery out of the reach of many consumers, they are increasingly trading in old jewellery for new ones, said Amit Modak, managing director of PN Gadgil and Sons, a Pune jeweller.
Refiners are obtaining scrap from replaced jewellery to maintain operations, while imports of dore – a semi-pure alloy of gold and silver, which is mined – have declined sharply, Ajmera said.
The scarce supply of scrap before the festive season is good news for banks, as jewellers increasingly seek them to satisfy demand from imported gold.
Indians will observe Dussehra and Diwali in October, festivals when purchasing gold is auspicious.
Increasing prices typically spur heavy discounts as scrap surges into the market, but tight supplies are enabling banks to still charge a $1 premium even at record price levels, according to a Mumbai-based jeweller with a bullion importing bank.
India’s gold imports in August rose 37% from last month to $5.4 billion, trade ministry data indicated.
