Gold decline adds glitter to jewellery exporters’ margins

Gold decline adds glitter to jewellery exporters’ margins

New Delhi: A sharp fall in gold prices is a good news for gems and jewellery exporters who will be able to source yellow metal at lower rates and compete better in the global market, industry sources said.

After seeing the steepest ever fall of 1,540 per 10 grams in a single intra-day market, gold lost 600 on Monday on cues from the global markets where investors are busy shuffling their investment portfolios.

Gold closed the day at 26,740 per 10 grams in the Delhi market.

The exporters feel that they would stand to gain if gold prices continue to decline, along with a fall in rupee against dollar. The Indian currency is near 50-to-a-dollar mark, weakening by about 9% within this month. A weak local currency results in higher net realisation for foreign exchange earned by exporters.

Indian gems and jewellery industry imports about 80% of its raw material, including gold and rough diamonds from countries like Africa and Russia.

“It (fall in gold prices) is a good sign because a company can import the yellow metal at a lower rate bringing down the cost of the end-product which is meant to be exported further," Director general of the Federation of Indian Export Organisations (FIEO) Ajay Sahai said.

The situation would lead to an increased business for the exporters, he added.

The UAE is the main destination for India’s gems and jewellery, accounting for 31% of the total exports, followed by Hong Kong and the US.

However, Gems and Jewellery Export Promotion Council vice chairman Sanjay Kothari said so much volatility is not good.

With consignments of $33.54 billion, gems and jewellery was India’s third-largest export item in 2010-11.

During April-August period this fiscal, gems and jewellery exports grew by an annual 16% to $18.12 billion.