Scrap sales surge on profit-booking

Scrap gold sales have surged 20 per cent in the last three days in spite of bullish market sentiment as worried investors booked profit ahead of Akshaya Tritiya, considered an auspicious day to buy gold.

When gold prices were hovering at Rs 16,000-16,500 per 10 gm a couple of weeks earlier, Mumbai-based retailers like Jugraj Kantilal were collecting three kg of used jewellery daily. This has since risen to 4-4.5 kg a day. Jitendra Jain, partner of Jugraj Kantilal, attributes this to a dramatic rise in prices last week.

Normally, 30 per cent of gold is made available through recycling in India, the world’s largest consumer. But, skyrocketing prices increase old gold’s availability. Global consultancy firm GFMS Ltd estimated India’s total gold demand at 432 tonnes in 2009.

Confirming the surge in used jewellery sales, Ashok Minawala, ex-chairman of the All India Gems & Jewellery Trade Federation, said, “Indian consumers respond quickly to every gold price rise. Since the price dissemination system has become very powerful on Wednesday, consumers’ decision making capacity has enlarged. They also get to know the future implication of price spurts. Therefore, they cash in before profit booking starts in the global market.”

The World Gold Council (WGC), in its latest report, had estimated India’s gold availability through used jewellery to have risen sharply to 200 tonnes in 2009. The report, however, is silent on comparative figures for other years. High prices last year lured consumers to sell a portion of their holdings and invest in real estate.

Gold availability from domestic scrap recycling declined to 17 tonnes in the fourth quarter ending December 2009, from 18 tonnes, 23 tonnes and a staggering 64 tonnes in the third, second and first quarters of the same year, respectively. WGC is preparing a gold report especially on India which is likely to be made public by the end of the current fortnight.

Analysts believe retail consumers in India cash in on their extra holding of gold, fearing the metal may crash due to lack of fundamental support.