KOCHI: Have you heard of cash back on buying gold? The gold retail business has taken such a hit post demonetisation that some have been pushed to such measures. According to industry players, both the jewellery and gold loans segment have been hit hard by the move and the subsequent cash crunch.
Jewellery sales were down by 85 percent initially and sales have still not stabilised. The gold loan business, meanwhile, came to a standstill and is now scrambling to recoup. The cash back offer by Malabar Gold and Diamonds was hitherto unheard of.
And crediting gold loan amounts to a customer’s account was the choice of only 25 per cent pre-demonetisation. But demonetisation has made it mandatory.
The price of gold is also making it hard for the industry to predict good times. Spot gold prices had ticked up last week, supported by a weaker dollar, though it continues to move in thin ranges near its more than 10-month low. It is also heading to post losses for the seventh successive week, a report by Geofin Comtrade Limited points out.
This turnaround has been harsh for the sector. 2016 had been an incredible year, but the bull run has only lasted till demonetisation. Prices, which had been on an upward trend almost all the year, have fallen — prices have decreased by `3,000 per 8 gram. “The impact of policies of the new US president Donald Trump will also be reflected on gold prices in 2017. Even though prices were a little bit high people have come forward to purchase gold in 2016. But everything changed after demonetisation,” pointed out Nishad AK, Executive Director, Malabar Gold and Diamonds.
In 2017, instead of investing in gold, investors might keep the dollar. “It is likely that gold market will remain choppy in the future,”he added.
However, gold loans, which are very vulnerable to fluctuations and took a hit have started to recover. “The immediate positive outcome of demonetisation is that the larger unorganised segment will see a massive drain in customer foot falls. A clear shift towards organised players will take place in 2017. Hence demonetisation will be a blessing in disguise,” pointed out George Alexander Muthoot, Managing Director, Muthoot Finance.