High prices trigger rush for jewellery sale

With gold prices breaching all previous records, sales of used jewellery, or scrap, in India have increased four-fold in the last one-and-a-half months.

Prices of the yellow metal crossed $890 per ounce during the day on Wednesday. In Mumbai, it closed at Rs 11,280 per 10 gm for 995 purity gold, tempting consumers to sell jewellery to cash in on the boom.

According to Ajay Mitra, MD, Indian sub-continent, World Gold Council (WGC), scrap is being sold for two purposes: One, a set of customers, who built their stocks through intermittent buying in the past, is de-stocking to book profit and invest in real estate and bonds. And, two, another set of customers is exchanging their scrap for new gold jewellery with latest designs as jewellers are making attractive exchange offers sans making charges.

Normally, total scrap recovery constituted roughly 30 per cent of jewellery sales. But, of late, used jewellery sales in major cities, including Chennai, Mumbai, Delhi and Kolkata, have quadrupled, said Ashok Minawala, chairman, All India Gems & Jewellery Trade Federation.

According to the data compiled by WGC, India's total gold imports stood at 689.7 tonne between January and September of 2007, up from 491.8 tonne in the same period of the previous year. In 2006, India imported 721.9 tonne of gold.

The country's highest ever imports recorded by WGC was 774.4 tonne in 1998. Experts believe that total imports in India will surpass 800 tonne this year.

The shooting sales of scrap can largely be attributed to the record-breaking price hike in the last four months when standard and pure gold in India shot up by 20 per cent to Rs 11,080 per 10 gram and Rs 11,125 per 10 gram respectively. However, a strengthening rupee against dollar has put a cap on gold price in the domestic market.

Consequently, the global price hike during the period under consideration has not yet fully reflected on the domestic market.