Jewellers turn to commodity trading

Punjab jewellers make the most of bull run in bullion

Since increases in gold and silver prices have resulted in decreased sales businessmen are venturing into commodity trading to counter this decrease in sales and to make the most out of the bull run in the gold and silver commodities markets.

Commodity market brokers in Chandigarh said almost one-third of their volumes come through the jewellers who were participating in the bullion commodity trading markets.

Talking to Business Standard, V K Joshi, director, Vikson Finance and Investments, said, "Jewellers have good insight of this market and they have the natural instincts to sense the market trends. That is why they have started showing interest in the market, which was not the case earlier. We have found that they do not like to trade in the bullion market, but the slump in the consumer demand, due to all time high prices is forcing them to participate in commodity markets."

The Guru Bazaar, near the Golden Temple, Amritsar, is also witnessing a 30 per cent to 40 per cent dip in sales. It was famous for shops dealing in designer gold jewellery and also wholesale products.

A jeweller said the high prices had crippled their sales. He said, "Earlier, in the marriage season, the daily sale of gold jewellery in this market was 10-15 kg. But, due to the high prices, the market is witnessing a 30-35 per cent decline in sales.

Moreover, tough competition is also a problem. In the 1990s there were 45-50 shops in the bazaar. Now there are 170-200 shops. When we consider the entire city, there are around 1,500-1,800 shops. Most of the jewellers have started trading in the gold and silver commodity trading markets and are also using it for the purpose of hedging."

He said many jewellers in Amritsar had also taken the terminals to trade for themselves and their selective clients. He added that the downfall in consumer demand had made the commodity markets their secondary business these days. "The brokers know this and they are marketing aggressively for acquiring new jeweller clients."

He added that the jewellers do not want to disclose that they are trading in the markets as this gives a negative impression to the customers about the jeweller's reputation.

He said most of the jewellers were trading in the markets either on their own terminals or through brokers.

Gurmeet Singh Chawla, director incharge of Master Capital, Chandigarh, said, "In the bullion market, there had been growing participation from the jewellers. We also have such clients and about 30-40 per cent of our volumes in gold commodity market comes through them. We have also provided the work station at client's end through internet trading module of exchange."

Chawla said the yellow metal is higher by 40 per cent since June 2005. The international demand for gold was chiefly driven by fears about the future.

The possibility of rising prices of petroleum due to various reasons, uncertainty in the Middle East and the gradual slide in the value of the dollar have led jewellers, to bet that gold will be a safe haven to park money in. The more adventurous have forecast even higher prices before the year is out.

Sandeep Talwar, Owner of Talwar Jewellery Sons, Chandigarh, however, says that the demand by the consumers has gone down tremendously as there has been no fresh buying of ornaments but as the demand for wedding is concerned, people are converting the old jewellery into the new one. There are very few people who are going for new ornaments."

However, he said that there is very less time for them to trade in the commodities market. Moreover, it is becoming impossible to understand the market.