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Source: www.asiaecon.org |

INCREASED GOLD PRICES IMPACTS INDIA'S GOLD IMPORT AND JEWELRY MARKET


  Whilst the general global economy is slipping into global recession, the commodities market continues to attract new investors and market gains. This is particularly true in the case of gold. Global investors are finding that the gold market is a lucrative investment and are looking to buy bullions and coins. One market, though, that has been hit especially hard by the rising price and interest in gold is India.



Whilst the general global economy is slipping into global recession, the commodities market continues to attract new investors and market gains. This is particularly true in the case of gold. Global investors are finding that the gold market is a lucrative investment and are looking to buy bullions and coins. One market, though, that has been hit especially hard by the rising price and interest in gold is India

India typically imports 800 tonnes per annum or 20% of the world’s gold.  Approximately 600 tonnes of the imported gold goes towards jewelery.  Gold is seen as an auspicious metal. It not only plays a vital role in weddings and holiday festivities but also in the livelihood of Indians in the poor rural areas, where jewelry is used as a savings account in the absence of banking systems.

But with gold prices rising as high as $950 an ounce and the U.S .dollar weakening, sources are observing a drop in jewelry sales over the last couple of months. This is not a good omen for jewelers as the next couple of months mark the wedding seasons and holiday festivities,  typically the height of jewelry purchases. Some sources state that the 15-20 percent drop in jewelry sales can not only be attributed to high gold prices but also to Indians waiting for gold prices to stabilize.

Even if this is to be the case, Indians now look to take advantage of the high prices of gold. Many Indians are now selling their jewelry, which is atypical in a culture that seeks to amass gold. The increase of Indian sellers have led to unorganized markets since it is illegal to export scrapped gold where Indians can make up to $30 a gram.

Experts in the commodity industry expect gold prices to continue to reach highs as investors continue to invest in bullions and coins, thus continually driving up prices. However, some Indian jewelers remain optimistic that it will not deter potential customers in the upcoming months to purchase jewelry during wedding season and the upcoming Akshaya Thrithiya fesitval, which is the third most auspicious day in the Hindu calendar.

Although there are a few who remain optimistic, sources in the Commodity Service deem the high prices not only as problematic to the jewelry industry and consumers but also to the commodity market itself. The high volume of sellers contribute to the influx of buyers looking to buy scrap gold. This leads to India not being able to maintain its current position as the leading gold importer. This marks a dramatic change in gold imports in India but could potentially be even more damaging to the already weakened rupee. 

Some sources predict that gold may even reach $1,030 an ounce before the Akshaya Thrithiya festival, which might prove to be harmful to the jewelry market in India.  This might further increase the number of Indians willing to depart with their jewels hence further impacting the imports of gold in India. On the other hand, with the increased amount of gold available and the weakened rupee, foreign investors might be looking towards India for scrap gold as investments.

Source: AsiaEcon.org
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Source: www.asiaecon.org |


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