Gold trade slumps in Agra

It is often said that "old is gold", but it seems for investors in the bullion market, the time has not yet come to roll out their "old gold" with the yellow metal still needing another boost to clear the Rs 9,000 mark per 10 gm.

Agra is one of the premier centres of trade in precious metals like gold and silver in North India, trading in enormous quantities both in the form of raw metal and jewellery.

In a town where an entire market is dedicated to jewellery trade, the phenomenal hike in gold prices over the past year has come as a severe blow, bringing the gold trade to barely 40 per cent of the 2004-05 figures.

With the wedding season already on full bloom, the jewellers of this town are facing the worst business turnover in the past 25 years, forcing them to drop rates by more than Rs 600 per 10 grams for the gold jewellery in order to elicit more buyers, offering huge discounts and "exchange offers" to increase retail jewelry sales though their efforts hardly seem to be working, with the mostly middle-class buyers of the town making drastic cut-backs in their budgets for jewelry purchase.

Raj Kumar Verma, owners of Shringar Jewelers in Agra, said that the jewelers of Agra traded in over Rs 1,000 crore worth of gold and silver jewelry in a year but since April 2005, this market had been witnessing a continual drop in sales and till December last year, the jewelry trade had been pegged at barely Rs 450 crore, which was still falling rapidly.

He said that a hike in gold prices similar to the present, had only been witnessed in the year 1979-80, when the gold prices began to rise from about Rs 800 per 10 gm. and had reached almost Rs 1700, causing a tremendous drop in the gold sales, though soon afterwards the prices stabilized, the market had witnessed a sharp drop in prices due to the influx of huge quantities of "Old Gold" and in only a short duration, the gold prices had come down to Rs 1100.

He said that a fall similar to the 1979-80 was imminent in the gold market which could be triggered by the investors pouring in their "old gold" stocks in the market to make the maximum profits out of their purchases, once the gold prices broke the Rs 9000 barrier.

But so far, he said, the influx of old gold in the market was not that significant to make a dent in the gold prices as the bulk dealers were still quoting prices over Rs. 8200 for 10 grams and the retail jewelers were being forced to offer discounts on their own to promote sales.

Besides, he said, the middle-class buyers, who formed the largest chunk of retail jewelry buyers in the Agra market, had been driven away by the price hike towards light-weight jewelry following the European fashion trends and since the local jewelry manufacturing methods were mostly low-tech, the stuff produced locally could not compete with the branded stuff in terms of weight and as a result, a large number of retail buyers were now becoming attracted towards the light-weight jewelry offered by reputed brands like Tanishq, instead of purchasing the heavier, custom-designed jewelry.