CHENNAI: If anything should be an indication of an economy in the doldrums, it has to be Indians not flocking to buy gold when prices are depressed. In fact, the last four months have seen a 5.5 per cent decrease in gold prices in India. But there has been no spike in sales.
Jewellers in the city are divided on whether gold is being bought as much. Some say that sales are good, while others point out that they have not witnessed the same level of enthusiasm as other price drops have triggered. None though, even when they said that sales are very good, have been able to report an increase in sales.
Jayanthilal Challani, president of the Madras Jewellers and Diamond Merchants Association, pointed out that the last few months, ever since prices started falling, have been one of the best for sales in the city. But even he shied away from admitting a spike in gold purchase.
“If you ask me whether sales have gone up compared to the same period last year, I can only tell you that they are holding steady,” he admitted, while adding that he was talking about the sales in his shop. “Volumes have definitely increased for the industry in total,” he said.
Ajay Vummidi of Vummidi Bangaru Srihari Sons disagreed. “I will say that there has been an increased interest,” he said. “But is the interest being converted into sales? Then no. There hasn’t been any spike in sales though gold prices have fallen,” he admitted.
His statement stands in stark contrast to the mobbing that a fall in gold prices would have triggered half a decade ago.
According to him, buying tendencies have changed across India. “We are seeing only a flat demand now. There are several factors that have resulted in a decline in gold buying, including a poor economy, a slight loss of confidence in gold because people have seen prices falling, and the expense ratio increase,” he said.
In short, inflation and the resulting decrease in liquidity have lessened the enthusiasm for gold. This could even be a small factor in the current fall of gold prices, according to analysts. While driven by the international fall in prices, the decline is continuing unchecked, leading to an absence of an increased demand that a fall usually triggers in India.