Jewellery sales shoot up on panic buying with old notes

Rise 15%; gold premium down 33% on increased availability in the domestic market

Jewellery sales shot up 10-15 per cent on Monday amid panic buying by people rushing to use their pre-2005 currency notes. Gold premiums declined 33 per cent to $80 an ounce in India on Monday from $120 on Friday, on increased availability in the domestic market, trade sources said. The fall in premiums was also said to have aided higher sales.

The buyers appear concerned about the Reserve Bank of India’s (RBI’s) announcement of withdrawing pre-2005 banknotes and replacing them with those with added security features from April 1.

Retailers have seen abnormally weak business in the past 18 months, since Finance Minister P Chidambaram announced curbs on gold imports and the RBI introduced the 80:20 scheme (mandating that a fifth of imported gold be routed to exporters).

“Pre-2005 notes will be directly converted to new ones by banks. So, there is no problem in accepting such notes as of today. But, it looks like black money has started coming into jewellery as sales have increased unusually by 10-15 per cent, which is significant as the wedding-season demand was already robust,” said Kumar Jain, director, Umedmal Tilokchandji Zaveri, a jewellery retailer in Zaveri Bazaar here.

Customers prefer to avoid a single billing of over Rs 5 lakh to avoid the taxman’s glare. A bill over this mark requires a permanent account number (PAN).

“Therefore, even one customer takes many bills in the names of family members. But, they want every bill amount to remain below Rs 5 lakh. But, we do provide details of customers for any bill amount the taxman seeks,” said a jeweller.

The rush of consumers with pre-2005 notes is expected to rise with the deadline of March 31 drawing closer. “Currently, there is no commission charged by jewellers for accepting such notes. But, we cannot rule out such a possibility, especially towards March-end,” said Jain.

Meanwhile, many retailers have stopped accepting pre-2005 currency notes. “It is better to remain on the safe side,” said one.

Mukesh Mehta, director of Punya Gold, a jewellery manufacturer and wholesaler, said, “While sales are up, it is difficult to attribute these to pre-2005 notes alone.”

Spot gold in Zaveri Bazaar closed unchanged at Rs 30,200 per 10g on Monday despite the rupee falling from 60.70 to 63 against the dollar. The metal lost its early gains to trade $7 lower at $1,263.8 an ounce in London ahead of the US Federal Open Market Committee meet on Tuesday, in which experts forecast a further $10-billion tapering announcement.