Mumbai: Record high gold prices in India have triggered a surge in recycling of the precious metal as consumers rush to cash in on their holdings, while imports have almost ground to a halt, traders and dealers said on Wednesday.
Gold on the Multi Commodity Exchange of India Ltd (MCX) hit a fresh high at Rs15,617 ($313.6) per 10 grams, extending the previous day’s gains on firm overseas markets and a weaker rupee against the dollar.
“There are lots of sellers... This time big lots are coming of 200-300 grams per person,” said Jitendra Kantilal Jain, partner at Mumbai’s Jugraj Kantilal & Co, which buys scrap gold for refining and repackaging as bars. In the spot market, banks, the primary sellers of imported gold, quoted even higher, with Scotia Mocatta quoting at Rs15,700 per 10 grams as it has to peg local prices to the foreign market.
The rupee’s exchange rate impacts gold prices as most of the metal is imported in India and paid for in dollars.
In the overseas market gold was at $972.70 an ounce on Wednesday, close to its seven-month high hit a day ago at $973.20, with worries over a contracting US economy and safe haven buying underpinning the metal. Kantilal, whose gold business in the heart of Mumbai’s Zaveri Bazaar has been running for 40 years, said a queue of about 60 sellers, mostly women with their old jewellery, formed on Tuesday as the latest rally in prices began. “Most of the gold is in jewellery form though some coins and bars are also coming,” said Prakash Jugraj Jain, the other partner in Jugraj Kantilal.
Scrap sales typically start in India when gold breaks above key psychological levels and are expected to intensify given the record-breaking prices on offer, said Suresh Hundia, president of the Bombay Bullion Association.
“Up to 150 kg can land up in Zaveri Bazaar in a day,” he said.
Gold’s rally has hurt imports in a big way this year as most of the demand for weddings is being met through cheaper recycled stocks.
So far in February, no imports have taken place, Hundia said earlier, and in January, overseas purchases dived by more than 80% from a year ago to 1.9 tonnes.
“There is no demand at all since the beginning of February,” said Afshin Nabavi, head of trading at MKS Finance, a Geneva-based gold supplier.
Nabavi said that unless gold fell below $800 an ounce, Indian demand was likely to remain subdued with recycled gold continuing to replace imported metal.
India is the world’s biggest consumer of gold, and generally imports around 700 tonnes a year with an additional 200 tonnes being recycled from old stocks.
Trade estimates suggest ordinary Indians hold about 15,000 tonnes of gold at any time.