Gold price jumps in India, jewellers unveil new schemes to lure buyers

Thirty-year-old Tanya Mehta had a surprise waiting for her as she walked into a Tanishq showroom in South Mumbai on October 25. Though gold prices have regained their lofty perch after seven weeks in Mumbai, the jewellery showroom has a three-day offer luring customers with free gold coins for diamond jewellery purchases and around a 20% discount on gold jewellery charges.

As the price of gold reaches a new high in India in the run up to Diwali, bullion houses lure buyers with benefits beyond mere adornment.

Tanya could not believe her eyes. “I wanted to buy a small gold neckpiece and decided to do some shopping before Diwali, which commences on November 1, when the price of gold is bound to shoot up. I never imagined I would get free gold coins or even discounts particularly at this time. A single buy has turned out to be a major investment benefit,” said Tanya, who ended up purchasing not just one 21 gram gold necklace, but also a set of diamond earrings, to get her hands on free gold coins.

Tanya is a case in point. With Diwali, the festival of lights around the corner in India, gold jewellers and retailers are exploring different ways to restore the yellow metal’s glitter, given dwindling sales all through the month. 

Gold traders said that walk in customers have slowed this month, killing overall sales. “The government has choked off gold imports. There is a lot of negativity surrounding gold imports and jewellery stocks in the country. We realised that people are very nervous to go shopping for gold. We had to do something to bring them back again,” said Manish Kedia, bullion retailer, whose store has a 25% discount on making charges of gold jewellery all through this month.

Amidst rising local demand in India, given the onset of the festive season, and a firming global trend, gold prices crossed the $520 (Rs 32,000) per 10 grams level in Mumbai on October 25, after seven weeks.

Hopes have also arisen that weak US data would deter the Federal Reserve from scaling back its stimulus measures this year, said traders.   

Gold prices spurted by $8 (Rs 480) to cross the crucial $527 mark (Rs 32,410) per 10 grams, a level last seen on September 4, while silver held steady at $815 (Rs 50,200) per kilogram.

Traders said increased buying of gold by stockists and jewellers to meet the rising festive and marriage season demand had influenced the sentiment. 

“There is no dearth of buying now because of the offers,” said Rajesh Mehta, bullion trader. “Consumers have started trickling in this week. The only way we can keep them engaged is by offering more discounts to temper the slowdown in sales, which have slipped by about 30% especially at the start of the month, when prices shot up by 5%.”

However, an analyst with Karvy Commodities Broking pointed out, “India, the largest consumer of gold in the world, has recorded a price rise to Rs 32,000 ($520) per 10 grams, more than the Rs 800-1000 ($12.99 to $16.23) premium over the futures, which also supported gold prices.”

“We are seeing huge demand at the local market ahead of the festive season. We continue to hold to a bullish approach as there has not been any significant change in the market dynamics and other factors,” he added.

Sanjeev Bhatia, chief financial officer at PC Jewellers said, given the restrictions on gold imports in India, the market did not have any new jewellery pieces. All of which has resulted in sales in the September quarter slowing down considerably.

Other offers include no wastage charges, no loss of gold on exchange of old gold jewellery pieces, and schemes promising extra cash for every gram of old gold a customer brings in. Jewellers have also turned their focus to diamond jewellery, for customers who are not ready to pay the high price of gold this season.

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