Surging gold prices hit Rajkot jewellers

Demand in the marriage season was far below expectations as buyers stayed away from purchases

Fluctuating prices of gold has hampered the trade and jeopardised the livelihood of 8,000 to 10,000 artisans associated with precious metal trade in Rajkot.

The business community has also been compelled to book losses at big margins.

"Estimated losses booked in entire gold market in Rajkot was nearly Rs 30 crore and this is the first blow of its kind received in all the years we have been engaged in the trade," claimed Bharatbhai Lathigra, a local goldsmith.

Most of the losses were caused by rising global prices, which saw large fluctuations even as traders negotiated deals with delivery some months down the line, he added.

Despite the marriage season, the precious metal trade in Rajkot witnessed a recession.

Normally, at least 30-40 tonnes of silver and 2000"�2500 kilograms of gold were traded every month this season, claimed sources.

"Business fell drastically to trading of only 125-150kg of gold while trading in silver was negligible. Routine business was hardly 25 per cent of normal volume in contrast to the boom normally witnessed during marriage season," claimed Narsinhbhai Soni, a city-based goldsmith engaged in the production of lightweight jewellery.

Most of the bookings of gold or silver were done on old rates before Diwali keeping in view expected demand from customers based on past experience of usual sales during festive days of Diwali and the post-Diwali marriage season.

But rising prices in international markets translated into huge cost escalations and also severely hit demand from customers, he added.

Many consignments were booked at old prices.

Traders dealing in the wholesale market refused to settle at old rates.

This resulted in a huge financial burdens on jewellers because that had to either compromise on quantity to compensate for the rise in rates or had to pay higher prices on agreed indicator.

"Either we paid more price or delivered less quantity "� the loss in any case was ours", claimed Narsinhbhai.

If the old transactions were to be cancelled still above the prescribed transacting limit, jewellers still had to pay the difference money on agreed terms and conditions.

If jewellers wished to back-out from the committed transactions, they had to pay the difference and exit.

This forced jewellers to shell out huge sums of money either to expand the time-period for transactions to achieve some parity with markets or to cancel deals.

In either situation, jewellers, to sustain the business, had to immediately withhold the stock or pay to get out.

This meant lower business and higher losses, complained Bhuveshbhai Ardeshra, another local goldsmith.

However, importers denied jewellers had sustained any losses. Other admitted some losses did occur but they were limited. Importers of precious metal in city said there was stagnation in the trade following a huge hype in gold.

In view of the transactions, traders were compelled to pay the difference money on agreed transacting terms and conditions in international markets.

Importers passed these costs to traders who transacted business using imported bullion for sale in the domestic market,claimed a leading precious metal importer in the city.

The business of precious metal trade had always been cyclical and trading in such a high value business was risky.

Prices and risks were determined by factors which could not be governed or controlled by any single factor, parameter or trade lobby, he added.

Local traders went wrong because they assumed some months ago that demand would be high during festive days of Diwali and in the post-Diwali marriage season following to good rains this year.

Unfortunately, the situation reversed and demand surged in the western world, where gold was suddenly perceived as one of the best investment options available.

As a result, there was a sharp rise in the prices of gold and silver in India and that too in a short time-period.

This coincided with a natural rise in precious metal demand.

Trades were less than expected while prices kept on rising, resulting in lower sales.

This compelled everybody involved in the trade to book losses.

However, losses were nowhere near the figure of Rs 30 crore claimed by a section of the trade, he warned.

As trading volumes were low, the estimated loss would be somewhere between Rs 12 crore to Rs 15 crore, he claimed.