Trend of Recycling Gold by Retail Users on the Rise

retailj
By retailj March 4, 2019 09:48

Trend of Recycling Gold by Retail Users on the Rise

The quantum of recycled gold in the system is on the rise in India on account of an increase in gold prices and some players ensuring transparency in evaluation and pricing, said jewellers and gold loan companies.

This trend is also helping curb imports, thus saving foreign exchange. India is the second-largest consumer of gold and the largest importer of the yellow metal, importing about 700-800 tonnes annually.

This has a bearing on India’s current account deficit (CAD). In 2017-18, India’s gold imports increased by 22.3% to $33.65 billion and the CAD jumped to $48.7 billion, or 1.9% of the GDP.

While gold imports have not shown a declining trend, jewellers said that had it not been for gold being recycled, recent imports would have shown a higherspike.

According to estimates, temples and households in India have more than 24,000 tonnes of gold, large parts of which are stored in vaults and used on a need basis.

Generally, people hesitate to sell gold. Goldsmiths and jewellers tend to use opaque and unreliable methods such as rubbing ornaments on a black stone, immersing them in some solution and conducting the entire process of gold evaluation out of sight of the seller, often resulting in inaccurate assessment of quality and quantity. This creates a deficit of trust among retail sellers. Now, some players offer transparent and scientific processes to evaluate gold thereby ensuring best value to sellers.

Take, for example, south-based Muthoot Pappachan Group, whose Muthoot Gold Point service claims to use transparent and scientific methodology from gold assessment to final payment, including executing the entire process in front of the customer. It also sends the collected gold to a refinery that converts it into 995 gold bars and supplies them to the domestic market thereby helping reduce gold imports.

Suvankar Sen, ED, Senco Gold and Diamonds, said, “We are seeing a 15% increase in old gold exchange transactions due to the increase in the gold price. Customers are keen to use their unused gold to meet urgent requirements of jewellery, say, for family occasions.

“Even new designs are being bought in exchange for old designs and jewellery. It will be good for the economy [if] recycled gold is used, which will enable the government to use [foreign exchange] for other purposes.”

Colin Shah, vice chairman, Gem & Jewellery Export Promotion Council, said, “Recycling of family gold is a great idea and can unlock tonnes of gold, subject to proper involvement and support of key stakeholders. Reduction in outflow of forex is great for the country and we hope the government reduces import duty from 10% to 4% as a consequence.” Reducing import duties, it is learnt, will help importers who use the gold, in turn, in jewellery meant for exports.

Anantha Padmanaban, chairman, Gem and Jewellery Council, said, “The launch of a comprehensive gold policy can help bring a lot family gold into the open market. [We] recently met key Finance Ministry officials and submitted a detailed roadmap for a revamped gold monetisation scheme. Its success is greatly dependent on the support of the banking and financial systems network.”

Courtesy: Hindu

retailj
By retailj March 4, 2019 09:48
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