Supply of used gold jewelry and coins in India has diminished, as many investors anticipate continued increases in bullion prices, which have recently reached new highs almost weekly. This trend contrasts with March, when spot gold first surpassed $3,000 an ounce, prompting a rush of selling among retail customers that significantly boosted scrap supply.
“Indians now believe gold prices will rise even higher, which is why they’re choosing to hold their assets instead of selling them for a profit,” said James Jose, managing director of refiner CGR Metalloys, during the India Gold Conference in New Delhi. Local gold prices recently peaked at 110,666 rupees ($1,260.94) per 10 grams, marking a 42 percent increase year-to-date after a 21 percent gain last year.
Harshad Ajmera of wholesaler JJ Gold House in Kolkata noted that scrap supplies usually increase when prices rise rapidly, as they did in recent months. “Consumers now think prices could even touch 125,000 rupees, so they’re holding on to their gold instead of selling,” he remarked.
While the high prices have made new jewelry less affordable for many consumers, they are opting to exchange old pieces for new ones, according to Amit Modak, chief executive of PN Gadgil and Sons, a jeweler based in Pune. As imports of dore—a semi-pure alloy produced by miners—have sharply declined, refiners are sourcing scrap from replaced jewelry to keep their operations running, Ajmera added.
The reduced scrap supply ahead of the festive season is advantageous for banks, as jewelers increasingly rely on them to meet the demand for imported gold. This October, Indians will celebrate Dussehra and Diwali, festivals that traditionally encourage gold purchases.
Typically, rising prices lead to deep discounts as scrap floods the market; however, limited supplies are now allowing banks to impose a $1 premium even amid these record price levels, according to a jeweler in Mumbai affiliated with a bullion-importing bank. India’s gold imports rose by 37 percent from the previous month to reach $5.4 billion in August, as reported by trade ministry data.
