India’s domestic jewellery sales usually pick up during last quarter of the year with commencement of festive and wedding seasons but so far no sign of demand-revival has been witnessed because of the high and volatile gold prices.
Jewellery demand from rural areas of the country has been badly hit as farmers have suffered back-to-back drought in 2014 & 15. At least 70% of gold demand in India comes from farmers and consumers from small villages who see jewellery as way to store wealth. But lower-than-normal monsoon rainfall this year has wind-swept rural incomes. Elsewhere in Asia also, the demand remains lacklustre.
Prices on the Shanghai Gold Exchange in China ticked up to a premium from a small discount during third week of October, though dealers at bullion banks say physical buying is not strong. “Demand is very sluggish,” says Mr. Ronald Leung, the chief dealer at Lee Cheong Gold Dealers Ltd. in Hong Kong, adding that a strong dollar and a recent price rally are hurting the demand. Premiums dropped to 80 to 90 cents an ounce in Hong Kong, from USD 1.20-USD 1.30 during last week of October.
The Diwali buying spirit seems to be dampened this year, with the traditional festive demand that usually starts from Vijaya Dashmi (Dussehra) being absent this year. Jewellers and analysts say prices are much higher and volatile as compared to the low level seen two months ago. There is not enough liquidity in the market either.
Also the gold import has been dull since September. Last month, total 52 tons of the yellow metal was imported and in the current month, it is estimated to be around that level, based on the trend so far. According to analysts, in October, so far 45 tons gold, including dore (unrefined gold considering et purity) has been imported.
The Director of Popley Group Mr. Rajiv Popley says, “Those jewellers who have ability to adjust as per changing customers’ choice have been able to maintain their business, while smaller jewellers who sell traditional jewellery are feeling the squeeze of lower sales in the wedding and festive seasons.” Some of the jewellers are changing the mix of plain gold jewellery, diamond jewellery, coins etc. and are able to create demand. Mr. Popley agreed that usual charm in Diwali buying of jewellery is yet missing.
The price of the yellow metal has been on the rise since the first week of October and will remain volatile till the end of the current year, feel the analysts. Jewellers say that the volatile trend in the gold prices has impressed silver prices too. One gram of silver is now priced at INR 40.50. The variations in the US economy and the increase in international gold prices have also impacted India’s domestic market.
On the other hand, the newly elected Chairman of India’s Gem & Jewellery Export Promotion Council (GJEPC) Mr. Praveenshankar Pandya has also warned that unless the Indian government extends active support, the domestic as well as export performances of the sector would be badly affected.
Addressing his first ever press meet after being elected to the top post of the Council, Mr. Pandya said, “The current slow-down in some of the key economies of the world has severely affected the demand and prices of polished diamond and finished jewellery. Besides, due to strong rough diamond prices the industry is facing sustained lack of real profitability in business.”
“Import of rough diamonds has sharp seen decline of 26% during April-September 2015-16 in comparison with the same period last year. This has affected the livelihood of the one million work-forces which was employed directly by the industry and may even increase further unemployment in the sector,” he added.
Mr. Pandya also described how India’s gem and jewellery industry has become uncompetitive in respect to the global markets. “The sector has been trailing in its lead with global hubs like Dubai and China, due to high interest costs and unstable taxation policies of the Indian government. I strongly feel that the Indian G&J industry is the perfect example for the Modi Government’s ‘Make in India’ initiative. However, ease of business is the need of the hour today and the government support is required to overcome all these challenges,” he added.
Posted by Suresh Chotai