High gold price hits jewellery demand in India
By Nalin Rai
MUMBAI, March 8, 2009 – Manoj Jain used to employ five workers at Mangalam Jewelers, in a middle class residential district of Mumbai.
They worked for him round the clock in shifts to meet the stringent gold jewellery requirements of shoppers for weddings and parties.
But as the gold price soared, suddenly his sales slumped.
So he had to send three of his workers back to their homes in Rajasthan, and he is now back to making gold jewellery himself to cut costs.
In one of the Big bazaars, a prominent shopping mall in Mumbai, there was a large area dedicated to sales of BIS-certified gold (the standard approved by the Indian government).
But now jewellers struggle to survive there as footfall collapses.
National Geographic recently carried a cover story on the importance of gold in the lives of Indians, particularly in the south of the country.
It also underlined the importance of gold in the culture and lives of Asians, whereas in the West the yellow metal does not have the same allure.
As the price climbed, jewellery buyers vanished in India, the world’s top gold consumer.
Gold became a seller’s market.
According to Rohit Singh, owner of Thaliya Jewelers at Ram Krishna Puram in New Delhi, on a day in which there may be 50 sellers, he would be lucky if one buyer were to visit his shop.
This sell-off of gold, though, goes totally against the family wisdom in India, as gold is considered the ultimate security, only to be sold in times of distress.
Economics seems to prevail over heritage, says Dr. Deepika Kaul, a retired professor from the University of Allahabad who still treasures the family jewels bestowed upon her by her mother.
The family’s tradition of investing in gold was studied by Mint, the business newspaper of the Hindustan Times published in collaboration with the Wall Street Journal.
It noted that the compound annual growth rate of gold in the last five years was 20.86 percent, while the return from the Bombay Stock Exchange was just 8.6 percent.
It underlined the fact that the financial industry needs to develop instruments to encourage savings in gold.