India’s gold imports in 2024 could fall by nearly a fifth from the previous year, as record high prices spur retail consumers to exchange old jewellery for new items, the head of an industry body told Reuters.
Lower imports by India, the world’s second biggest consumer of the precious metal, could cap a rally that carried global prices to a record this week.
“Affordability is severely affected by the rapid price increase,” said Prithviraj Kothari, president of the India Bullion and Jewellers Association (IBJA). “Retail buyers prefer exchanging old jewellery for new.”
Buyers save money as they only pay the jewellery making charges and tax when exchanging old ornaments for new ones, since they do not have to pay for the gold.
Preparing for his daughter’s wedding, Vinayak Patil exchanged 50 grams of old jewellery for new ornaments this month as prices put new jewellery out of reach financially.
“After adding making charges and taxes, I needed 475,000 rupees to buy 50 grams of new gold jewellery, which I couldn’t afford,” he explained, referring to the equivalent of $5,700.
“So, I decided to exchange old jewellery and pay just the making charges and taxes, which amounted to around 90,000 rupees,” Patil said.
Old jewellery, also known as scrap supplies, is recycled, and used for jewellery making.
In the March quarter, scrap supplies jumped 10% from a year ago to 38.3 tons, data from the World Gold Council showed.
Lower demand due to record prices and higher supplies of scrap will cut imports by 20% from a year ago, said IBJA’s Kothari.
India imported 744 metric tons of gold in 2023.
Domestic gold prices hit a record of 74,442 rupees for 10 grams this week, and have jumped 17% so far in 2024, after a rise of 15% in 2023.
“Rising gold prices are having a greater impact on jewellery demand compared to investment demand,” said Amit Modak, chief executive of PN Gadgil and Sons, a jeweller based in the western city of Pune.
The share of exchanges in jewellery purchases has gone up to 60% from about 40% last year, Modak said.
Jewellery demand accounts for three-quarters of the total demand, while investment demand makes up the rest.
Investment demand was strong earlier this year, but now record prices are prompting some investors to liquidate holdings and book profits, said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji.
