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The share price of jewellery manufacturers and retailers fell by up to six per cent on Monday, amid concerns of drastic erosion in the value of inventory due to falling bullion prices in the past few days. Goldiam International's share ended with a 5.7 per cent decline at Rs 19.80. Sector leaders such as Shree Ganesh Jewellery, C Mahendra Exports, Shrenuj & Co, Gitanjali Gems and Tribhovandas Bhimji Zaveri witnessed similar falls.
The price of gold plunged 4.8 per cent on Monday at the benchmark Zaveri Bazaar here, as stockists and retail buyers refrained from fresh purchases. Standard gold closed with a decline of Rs 1,330 at Rs 26,550 per 10g, as against Rs 27,880 per 10g on Saturday. Silver fell 7.1 per cent or Rs 3,615 to close at Rs 46,990 a kg as against Rs 50,604 a kg on Saturday.
"While hedgers would not be impacted, small traders with unhedged quantity of gold and silver will be immensely hit, with a drastic erosion in their inventory value," said Ketan Shroff, director of Penta Gold, a Mumbai-based bullion dealer. Jewellers normally hold stocks equivalent to three months of their sales. Falling prices of gold and silver have raised fears of proportionate erosion in the value of their inventory. In the past three days, bullion prices fell 16 per cent, impacting the value of these stocks.
Panic selling continued in the futures market, with the near-month contract on the Multi Commodity Exchange traded at a little over a five per cent decline at Rs 26,601 per 10g, following a similar trend in London, where the yellow metal hit the near-month support level of $1,385 an oz before recovering a little to $1,407 in early afternoon trade. The near-month silver contract followed and fell eight per cent to Rs 45,561 a kg on the MCX.
The fall in bullion, however, encouraged a handful of large stockists to place fresh orders. According to Shroff, banks have placed new orders with suppliers and the new quantity is set to hit Indian markets in two-three days.
The fall is considered good for a resurgence in demand ahead of Akshaya Tritiya, which falls in this year on May 13.
According to Gnanasekar Thiagarajan, director, Commtrendz Research, gold broke the medium-term target of $1,385 an oz on Monday in the global markets, setting the next support level at $1,300 an oz, possible soon. The sentiment has changed completely from bullish to bearish within a short period of time. After 12 continuous years of upsurge, weakness of a year or two was imminent. The market continues to remain in panic selling mode as traders exited together, on hearsay.
The confidence in gold has been severely dented given the magnitude and the forcefulness of the recent fall. Fears of a Cyprus-like 14 tonnes of gold sale and of other debt-ridden Euro zone nations following a similar trend, long liquidation in exchange-traded funds and unwinding of long positions by institutions in the international markets have contributed to the downfall, said Kishore Narne, head of commodities, Motilal Oswal Securities.
