By Rajendra Jadhav
MUMBAI Scrap gold supplies in India, the world's second-biggest consumer of bullion, are likely to halve this quarter as the cash crunch and falling prices make it difficult for consumers to liquidate their holdings.Lower scrap supplies could force the south Asian country to raise imports, which will support global prices that are near their lowest level in 5-1/2 months."In the December quarter, scrap supply could fall by 50 to 60 percent due to a shortage of hard cash and falling prices," said Sudheesh Nambiath, a senior analyst at metals consultancy GFMS, a division of Thomson Reuters.Earlier this month, Prime Minister Narendra Modi removed some larger bank notes to crack down on corruption. The move hit scrap gold buyers as most sellers prefer payments in cash. Just few weeks back, customers use to queue outside Jitendra Jain's tiny scrap gold shop in Mumbai. The shop has been deserted since the government got rid of the high value notes.
"Business has been affected badly due to cash crunch. We are able to buy gold only from customers that are accepting payment by cheque," said Jain, who used to buy around 2 kilograms of gold every day, but now manages to buy just 100 to 200 grams."But very few customers prefer cheque payments. Most people insist for immediate payment in cash."Most shops of scrap gold buyers were deserted in Mumbai's Zaveri bazaar, the country’s biggest bullion market.
In the quarter ending in September, the scrap supply hit a record high of 58.8 tonnes as local prices jumped to their highest level in nearly three years in July, according to GFMS. Local prices have corrected 10 percent from the July peak."People sell gold when they badly need cash. Right now they are not getting cash even after liquidating gold," said another scrap gold dealer based in Mumbai, who asked not to be identified.Like scrap dealers, the shortage of currency notes has also been hitting jewellers.
"Demand is very weak. Consumers are postponing purchases," said Bachhraj Bamalwa, director at All India Gems and Jewellery Trade Federation.Last week gold premiums in India jumped to the highest in two years, but on Monday gold dealers were offering at a discount up to $5 an ounce."People are not able to make gold purchases even for wedding in rural areas. For next few weeks demand will remain subdued," said a Chennai-based jeweler, who asked not to be identified. (Reporting by Rajendra Jadhav; Editing by Christian Schmollinger)
This story has not been edited by Firstpost staff and is generated by auto-feed.
Updated Date: Nov 22, 2016 16:01 PM