Gold sparkles this Dhanteras on stable prices, PMLA withdrawal

Jewellers see sharp recovery in sales, with some eyeing an increase of as much as 25% in sales volumes

Gold demand on Tuesday on the occasion of Dhanteras, the day when buying it is considered auspicious. The expectation is that this was due to a stable price, favourable monsoon rain, resulting in hope for increase in rural incomes and, importantly, withdrawal of the earlier applicability of the Prevention of Money Laundering Act (PMLA) from the jewellery sector.
 
The PMLA withdrawal was announced a week before and gold demand emerged right after; the announcement had extended the cash purchase limit to Rs 200,000, from the earlier Rs 50,000. There was a rush to jewellery shops for booking jewellery and coins for delivery on Dhanteras.
 

Source: IBJA; Compiled by BS research Bureau

That pre-booking did not deter new demand on Dhanteras. Jewellery shops across the country were full of customers and jewellers offered big discounts on making charges, beside other incentives. Many were hoping for a 25 per cent increase in their sales volume.
 
“Gold demand seems to be recovering after withdrawal of the AML guidelines on jewellery buying. A good monsoon and stable gold prices are definitely encouraging consumers to make token purchases for the auspicious festival. The ensuing wedding season, however, holds the key for quarterly demand performance. This year, digital channels have also increased consumer choices and created a more conducive environment where one can save and hold vaulted gold,” said Somasundaram P R, managing director of the World Gold Council’s the arm here.
 
Apart from physical retail buying, Dhanteras also saw online investors booking for delivery in the future — among the schemes on offer were ‘Me Gold’ from Motilal Oswal and ‘wallet gold sale’ by Paytm, beside other electronic accumulation plans.
 
“Jewellery demand has reached a reasonable level now,” said Rajesh Mehta, chairman, Rajesh Exports, a Bengaluru-based jewellery manufacturer and retailer.
 
The price of gold has moved in a narrow range through this year, with stability in the past two months. Analysts think the price will bounce back in coming year (the Hindu one, Samvat 2074, beginning with Diwali on Thursday).
 
“At the beginning of the season, due to PMLA, there was a concern. However, the actual run-up to Diwali has been positive. From a consumer’s perspective, there is no sense of gloom, at least with respect to the jewellery category, and we expect this year’s Dhanteras sales to be higher than last year. We believe the growth will be volume-led,” said Vijay Jain, chief executive of the Orra jewellery chain.
 
Kumar Jain, Director, Umedmal Tilokchand Zaveri, a bullion dealer and jewellery retailer, expects a 25 per cent increase in demand for both ornaments and coin this year.
 
Overall, gold demand on the occasion of Dhanteras is estimated to be around 40 tonnes, almost similar to last year, jewellers say. Major retailers are offering up to 100 per cent discount on making charges in diamonds and up to 60 per cent on gold ornaments.