Jewellers are staring at subdued Diwali sales this season, with customers unlikely to spend on gold ornaments due to prohibitive prices of the metal. Early signs of tepid festival sales were evident in the poor offtake on Dussehra.
In private discussions yesterday, some jewellers admitted to drop in sales of about 50-80 per cent from last year's Dussehra. This demand depression in world’s second largest consuming country also points to dismal Diwali sales, as prices are showing no signs of retreating.
The price of gold in Mumbai's wholesale market at Zaveri Bazar today was Rs 38,200 per 10 grams for standard gold, plus three per cent GST, taking the price to nearly Rs 40,000. This is 20 per cent higher than the price of standard gold last Diwali.
Surendra Mehta, national secretary of Indian Bullion and Jewellers Association (IGJA) said, “All indicators suggest that jewellery sales this Diwali could be lower by as much as 50 per cent than last year.”
Gold imports in September also suggest a dismal scenario. About 26 tonnes of the metal were estimated to have been brought into the country last month, which is the lowest monthly import the past three years and about 80 per cent lower than September 2018. The import scenario in October so far is more or less the same. Last week, there was a sharp, albeit brief fall in prices for a day or two, raising hopes of a recovery in gold demand. However, the subsequent pick up in prices belied those hopes.
Said Aditya Pethe, Director, Waman Hari Pethe Jewellers: “Dussehra sales were also 20 per cent lower than last year and, at the current prices, demand is likely to be 20 per cent lower during Diwali as well.”
Gold prices also increased the past few days due to the sharp fall in discounts. In the formal wholesale market, the metal was earlier selling at $55-57 per ounce, or a Rs 1,100-1,200 discount per 10 grams on the landed cost of officially imported gold. The discount narrowed down to Rs 400 per 10 grams or $20 an ounce, taking the wholesale price of the metal up substantially.
The reduction in discount by a third is credited to tight supply, following withdrawal of duty-free gold import benefit for machine-made jewellery and coin exports under the advance authorisation scheme. Following this move, during the past few days, the discount prevailing in market on the cost of imported started falling as supplies dwindled. However, the fall in discount does not indicate a revival in demand, says an analyst tracking gold import trends.
IBJA today declared that retailers' indicative price for 22 carat or 916 purity gold, which consumers buy for jewellery, stood at Rs 37,200 per 10 grams, compared with Rs 35,208 in the wholesale market. Consumers would also have to shell out three per cent on the purchase price towards GST.