With gold trading currently near a four-week low, jewellery consumers are abstaining from fresh purchases and banking upon replacement and incentive-based schemes in this festive season.
Purchases of gold jewellery over Rs 50,000 would require submitting KYC details under the Prevention of Money Laundering Act (PMLA). This provision has caused fears amongst consumers. Those not willing to identify will be able to make very small purchases.
Most jewellers have introduced 12 + 1 (twelve months consumer and one-month jeweller) scheme. A number of jewellers have introduced 9 + 0.75 scheme under which the jeweller deposits 75 per cent of the first month’s payment after investor deposits a fixed amount for nine months without any interruption.
“After a fortnight of inauspicious pitripaksha immediately the Durga Puja, we have seen an increase in consumer footfalls. The new jewellery demand has been negligible. Most jewellery orders are of replacement or scheme related ones which cannot be a healthy sign for jewellers,” said Kumar Jain, Director, Umedmal Tilokichand Zaveri, a bullion dealer and jewellery retailer in Zaveri Bazaar.
Meanwhile, gold prices have fallen to the lowest in four weeks at $1,287 an oz after the US Fed affirmed on scheduled upward revision in the interest rate in December. Gold had hit Rs $1,294 an oz about a month ago on geopolitical tensions between North Korea and the United States. However, depreciation in the rupee had restricted the benefit of global price fall to Indian consumers. Standard gold slipped marginally to trade currently at Rs 29,625 per 10 grams after hitting the high of Rs 30180 per 10 gram on September 15.
“The consumer sentiment is very weak today, which I have never seen in the last 36 years of my engagement in the jewellery business. Indian jewellery business has hit major blows in the last one year and than demonetisation happened in November 2016. Moreover, the government levied 3 per cent of goods and services tax (GST) on jewellery, followed by the PMLA extension. All these pulling the jewellery business down in India,” said Nitin Khandelwal, Chairman, All India Gems and Jewellery Trade Federation (GJF).
Interestingly, jewellery business cannot survive on replacement and scheme related purchases. Bullion dealers have imported enough gold over the first five months which, according to Khandelwal, is enough to feed the entire jewellery industry for the rest of the year.