Ahmedabad: Jewellers in Gujarat, the state that accounts for one-fifth of the demand for gold in the country, are worried that the combination of rising prices for the metal and stock market declines will dampen sales during the wedding season between end-March and end-May.
Most Indians spend heavily on gold for weddings, usually held during select periods that are deemed auspicious. For jewellers, the months heading into these seasons are the most lucrative as consumers rush to buy gold and other jewellery irrespective of the prices, though the recent steep surges have tempered purchases.
Catching eyes: A man looks at gold jewellery displayed at a show window in New Delhi. Gold prices shot up to Rs13,600 for 10g on Monday and reached a new high overseas. It was Rs9,520 in October.
Gold prices shot up to Rs13,600 for 10g on Monday, from Rs9,520 in October 2007, and reached a new high of $1,030.80 (Rs41,747.40) an ounce overseas. In addition, the sharp fall in the equity markets means potential buyers are either holding on to their stocks hoping for a recovery or are seeing their purchasing power weaken.
Meenaben Patel, who was visiting Ahmedabad from Dehgam to buy jewellery for her daughter’s wedding, said she now plans to buy less. “We planned to buy more than 240g of gold but looking at the price, we may not buy more than 175g,” she said.
Others, such as Ashwinbhai Bhatt, a senior manager with a private sector outsourcing company in the city, are recycling their old jewellery rather than buying new gold.
Ahmedabad, which has about 3,500 jewellery stores, is a key production centre for pure gold due to its established network, relatively better tax administration and easy logistics for dispatch and distribution of finished jewellery.
Rajkot, the fourth largest city in Gujarat, is known for its designs and exports to West Asian nations.
Of the 800 tonnes of gold imports in 2007, nearly 20% was imported by traders in Gujarat and converted to jewellery for sale across India.
The other main production centres for jewellery in India are Kolkata, Coimbatore, Mumbai and Bangalore.
H.P. Rajdev, owner of Ahmedabad-based consulting firm Commodities and Financial Analysts, said the precious metals market witnesses such drops in demand from retail buyers every time there is a sudden jump in the price or high volatility in the stock market.
The Bombay Stock Exchange’s 30-stock benchmark index, the Sensex, saw its second largest fall ever in absolute terms on Monday, as it declined 6% to close below the 15,000 level.
“Every time the stock market sheds points, we know the walk-ins would be affected for the next two days. If a jewellery outlet had a turnover of Rs25 lakh per day in February, today it is not more than Rs5 lakh,” said Manoj Soni of AB Jewellers in Ahmedabad.
Manubhai Soni of CG Jewellers said sales of gold jewellery dropped by up to 80% in the past five months. “If this continues, I will not be surprised if many small jewellery shop owners down shutters by next Diwali,” he said.
Goldsmiths and artisans too are hit by the slump. Ahmedabad has more than 10,000 artisans who design gold and silver ornaments. With them are the migrant workers, mostly from West Bengal, who are employed at the gold workshops.
“Today, only 5-10% of the artisans in Ahmedabad have work,” said Manubhai Soni.
The situation is not very different in Rajkot. Bharat Soni, a jeweller from Rajkot, said that while every worker can work on up to 30g of gold a day, today, with demand at a low, they work only on 2g of gold.