Indians Hold On to Gold as Prices Soar, Scrap Supply Falls Ahead of Festive Season
New Delhi — Unlike in March, when spot gold first topped $3,000 an ounce and many retail investors rushed to sell, this time Indians are holding onto their gold, betting that prices will climb even higher.
“Indians now believe gold prices will rise further, which is why they’re choosing to hold their assets instead of selling for a profit,” said James Jose, managing director of refiner CGR Metalloys, at the India Gold Conference in
Local gold prices hit a record 110,666 rupees ($1,260.94) per 10 grams earlier this week, up 42% year-to-date after a 21% gain last year.
Scrap supply usually rises when prices jump sharply, as seen in recent months, said Harshad Ajmera of Kolkata-based wholesaler JJ Gold House. But now, “Consumers think prices could even touch 125,000 rupees, so they’re holding on to their gold instead of selling,” he added.
Rising prices have made new jewellery costly for many, yet consumers are increasingly exchanging old pieces for new designs, said Amit Modak, CEO of Pune jeweller PN Gadgil and Sons.
Refiners are relying on scrap from replaced jewellery to keep operations running, as imports of dore — a semi-pure gold alloy from miners — have dropped sharply, Ajmera noted.
The limited scrap supply ahead of the festive season is a plus for banks, which jewellers are turning to for gold to meet rising demand. Indians will celebrate Dussehra and Diwali in October, festivals traditionally associated with buying gold.
Typically, soaring gold prices trigger heavy discounts as scrap floods the market. But with supplies tight, banks can now charge a $1 premium even at record prices, according to a Mumbai-based jeweller at a bullion-importing bank.
India’s gold imports surged 37% in August from the previous month, reaching $5.4 billion, according to trade ministry data.
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