The bullion industry panicked on Monday as rumours that the government may ban or further curb gold imports to harden its crackdown on black money gained pace, jewellers said. If the rumours persist, some may resort to quick panic purchases from abroad, driving up imports immediately. Also, some jewellers, especially in the unorganised sector who offloaded inventory to facilitate exchanges of high-value currency notes last week, need to replenish stocks now.

Gold prices touched a three-year high of R31,750 per 10 grams in Delhi last Wednesday, as people flocked to jewellery stores since Tuesday night when the government moved to make Rs 500 and Rs 1,000 notes invalid as legal tender. Prices effectively shot up to R45,000 per 10 grams or more that night in some places because people were willing to exchange the currency notes even for lower value while buying the precious metal.

However, since the govenrment has restricted the amount of cash that can be withdrawn from banks, people in rural areas — traditionally the biggest buyers of the precious metal — are facing an uphill task, according to Samir Sagar, director at Manubhai Jewellers. The footfall has decreased substantially from 150-200 a day per outlet earlier to 15-20 now, he added.

Ishu Datwani, founder of Anmol Jewellers, said many marriages have now been deferred following the government’s move. This will impact gold demand in the short term, but in the longer run, demand will rebound and jewellers will benefit from the government’s decision, he added. Also, once the fresh high-value currency notes start coming in and other restrictions are lifted, a lot of genuine, pent-up demand will drive up gold demand in a big way, said jewellers.

Tanya Rastogi, director at Lala Jugal Kishore Jewellers, said gold prices shot up last week as some unscrupulous jewellers took advantage of the demonetisation move. However, now gold sales have dropped and customers who had done advance bookings in view of the wedding season are either cancelling orders or deferring purchases.

Already, gold demand is estimated to hit a seven-year low to remain in the range of 650-750 ton in 2016, according to the World Gold Council. The lower projection came after a 28% crash in demand in the quarter through September from a year earlier to 194.8 ton. However, the London-based miners’ body on Tuesday predicted a rebound in demand in 2017 and that the rise in consumption since Dhanetras points at a revival.

Source: http://www.financialexpress.com/