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| Rising gold may force jewellers to cut inventories |
| Newswire18 / Mumbai Nov 15, 2009, 00:13 IST |
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Prevailing high domestic gold prices were expected to compel jewellers to restrict imports and release their gold stocks until March to keep the market well supplied during the ongoing wedding season, traders and dealers said.
“We expect jewellers to clear at least 10 per cent of their stocked gold this year, which would certainly further diminish fresh gold imports in coming months,” said Pravin Mehta, president of Madras Jewellers and Diamond Merchants Association.
Normally, jewellers look at either increasing their gold inventories every year or at least maintaining stocks at a particular level.
These jewellers usually make purchases in the lean June-September period, when prices are relatively low as demand is bleak owing to the monsoon season.
“It is difficult to state the total gold inventory level all local jewellers put together would maintain,” said Prithviraj Kothari, director of RiddiSiddhi Bullion.
He said every jeweller held gold inventory level as per his business requirement and it would be difficult to collate data on it. The dollar’s weakness against the euro and the recent purchase of 200 tonne gold by the Reserve Bank of India has propelled precious metal prices in global and domestic markets.
Having hit multiple highs in the last few sessions, Mumbai spot gold prices are currently hovering around Rs 17,000 per 10 gm.
“Skyrocketing gold prices would also press jewellers to pay a hefty tax amount on their gold holdings. So parting with higher stocks this year would be wise,” said Mehta.
Jewellers annually pay 30 per cent tax on incremental value of gold holdings in a financial year.
“Earlier, the year-on-year gold price difference would be Rs 50-70 per gm and was easily manageable, but since last couple of years the difference has been over Rs 150-200, which makes it too costly for jewellers,” said Mehta.
Impact on imports
Dependency on fresh gold imports might reduce considerably during the peak marriage season in October-December, as higher clearance of stocked gold by jewellers amid rising prices may help keep the local market well supplied, said industry officials.
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