Jewelers in the traditionally lucrative Indian gold market are struggling – even while the skyrockets of the value of the metal – as fears of coronavirus keep selling, artisans closing homes and shops.
Months after India lifted its strict lockdown, the country’s largest gold market Zaveri Bazaar remains desperate, with most stores closed and no customers in sight.
“We’ve been running this store for the last 40 years and I’ve never seen the company go so low,” said Madhubhai Shah, 75, one of only a handful of jewelers who decided to reopen.
The Mumbai market was hit hard by the March lockdown, which saw millions of migrant workers – including many gold craftsmen – flee the cities of India as their incomes dried up.
“Seventeen percent of our artisans have left their villages and manufacturers are all close,” Shah told AFP.
And with gold prices hitting record highs after rising about 30 percent this year, there is little incentive for customers to splash out on jewelry.
Even the impressive wedding season, which traditionally begins in October and families see a small fortune, has failed to captivate spirits or increase spending, as India has them for its first recession in four decades.
Chiranjeevi Ahire and his fiancé decided to break their tradition for their December wedding by choosing not to buy gold jewelry, although it is considered auspicious and a status symbol.
“Previously, we wanted the wedding to be a big affair and follow all Indian traditions, just like our parents,” the Mumbai-based marketing manager told AFP.
“But with the pandemic and the uncertainty in the labor market, we have decided to cut our spending on gold and instead save the money for a clean day,” the 29-year-old said.
– Gold-backed loan –
According to the World Gold Council (WGC), India’s gold consumption fell by a whopping 56 percent in the first half of 2020 compared to the same period last year.
Demand in the quarter from April to June fell 70 percent to 63.7 tonnes, the lowest since the 2008 global financial crisis.
The twin extinguishers of the lockdown and high prices meant that customers did not suffer their pockets even during the Akshaya Tritiya festival in April, considered a happy time for Hindus to buy the metal.
In addition to jewelry, Indians have traditionally stored gold bars and coins as hedges against inflation.
Many are using these now to secure credit, take advantage of the high value of the goods and secure lower interest rates on personal loans.
Bhadresh Gowda, a farmer in the state of Karnataka, used his wife’s wedding jewelry to secure a $ 200,000 ($ 2,670) credit line after huge losses during the lockdown.
“In the beginning, I was hesitant to use gold as collateral because these jewels are my family’s legacy, but times are tough,” the 39-year-old told AFP.
Unlike traditional loans, gold-backed loans are “very easily accessible with less paperwork required,” he said, making the process much faster.
“Gold currently offers more value for money. Once the economy improves, I will repay the loan and pick up my gold,” he added.
– Digital gold –
Some tech-savvy consumers are betting on prices that will rise even further as investors seek safe havens, and pump funds into so-called digital gold.
“Consumers buy digital gold in bits and pieces because it allows you to buy gold for … as little as one rupee,” said Rajesh Khosla, spokesman for the India Bullion and Jewelers Association.
“If they … have to convert digital gold to physical gold, it will be delivered to them,” he told AFP.
Gold will eventually make a comeback in India as consumers regain their appetite, said Somasundaram PR, managing director of WGC’s Indian operations.
“People who save money due to canceled holidays or expenses (will) invest in gold,” he told AFP.
But with the economy still in doldrums and coronavirus infections close to three million, consumers like Ahire would say they’d rather wait.
“It seems better to keep (my) money at the moment,” he said.
“With the global pandemic, economic downturn and weak employment prospects, I will not risk my financial stability for gold. It just seems like a terrible idea.”
vm / amu / stu / axn
