Gold markets saw a heavy rush of eager buyers of the metal for cash, following the government’s demonetisation of Rs. 500 and Rs. 1000 .
In Mumbai’s Zaveri Bazar – the biggest gold market in India – the turnout on Wednesday was higher than on usual business days even as the high denomination notes were no more a legal tender. A bulk of the trades in physical gold are cash transactions – a trend the government has been trying to minimise by introducing sovereign gold bonds.
“There was a rush of people and the prices also jumped by close to Rs.4,000 to touch Rs.35,000 per 10 grams. With the notes losing value, people turned to gold that has always given positive returns over a longer term,” said a jeweller, requesting anonymity.
A premium is attached to gold if it is bought in cash. While the premium is generally in the range of Rs.500 - Rs.1,000 depending on the demand-supply scenario, on Wednesday the difference surged to about Rs.4,000.
While cash is still the preferred mode of payment for gold, industry participants said the demonetisation move would help fight tax evasion. “The act of demonetising high value currency notes by the government will improve compliance, an important milestone in the journey towards the vision of becoming a cashless economy,” said Somasundaram P.R., Managing Director - India, World Gold Council.
