Gold Is Loosing It's Glitter!

Despite the pressure on gold prices and the new excise duty, all may not be lost for jewellery retailers.

- Venkatesh Babu

Akshaya Tritiya is a holy day for Hindus and Jains. It usually falls in the last week of April or in the first fortnight of every year. While the day is said to symbolise many religious events, for Vinay Kumar, like a large number of his countrymen, the day stands out for one reason mainly. Akshaya Tritiya is the day when, every year, he buys some gold in the form of ornaments or increasingly in the form of gold coins, as he believes that anything bought on that day will ‘multiply and be profitable’.

That was a strategy that paid off handsomely for more than a decade for 47-year-old Kumar, a fast-talking businessman who runs a hardware store. However, in 2015, he says, for the first time in nearly 15 years, he chose not to purchase gold . “In the previous three years, my purchase price was significantly higher than its current value,” he says. “In 2012, I was charged around `2,800 per gm of gold, excluding making charges, whereas the price in 2015 hovered around `2,300. I am unlikely to buy in 2016.” Even though prices have of late recovered to `2,900 per gm, they are still far below the `3,200-plus level touched in the middle of 2013.

The fall in gold prices and the resulting collapse in demand has not been kind on gold retailers such as Titan and Kalyan Jewellers. And just when they were starting to breathe a little easy due to the recent mini-rally, this year’s Union Budget dropped a bomb – it proposed 1 per cent excise duty on gold and diamond jewellery. The livid retailers say this will hit the nascent recovery and, in response, have gone on a nationwide strike.