Dizzy prices take shine off gold

Customers wait and watch as gold streaks past the Rs. 26,000-mark

Retailers in Bangalore reported sales plummeting by as much as 90 per centthis week.

The unabated run of gold prices in the last one week has taken the sheen off jewellers in the city, who have reported drastic decline in business as the price breached the Rs. 26,000-mark (for 10 grams) on Tuesday.

Most jewellery shops have had no business in the last two days or have witnessed a steep decline, as wary customers have put their wallets back in their pockets, waiting and watching. With the wedding season starting in October, this is also the time when most prospective customers start placing orders but the story has been very bleak so far.

Suspense and agony

Dhanalakshmi Jnanesh, a homemaker preparing for her daughter's wedding, is anguished at the spiralling price. She told The Hindu that she was torn between buying the precious metal now or postpone, like many others. Many middle-class people are now looking at recycling or exchanging old jewellery, particularly for weddings.

“Customers are sensitive to prices, and sales have declined to just 10 per cent of the normal business in the past few days,” said Mahavir Bafna of Akash Jewels. Acknowledging that retailers had been the most affected, C. Harish of Bhushan Jewel Craft said that speculative trading had increased.

Equity market link

The price of gold, which was Rs. 23,500 on August 1, started moving northwards soon after the downgrade of the U.S. sovereign credit rating from AAA to AA+ by Standard and Poor's. While the equity market took the beating, investors turned to bullion for safer investment avenues, which led to a steep rise in gold price.

“The festive season has been dampened by this development. We encounter customers who are worried that they may not be able to afford gold jewellery in case the price goes up,” according to Bangalore Jewellers' Association Secretary of S. Venkatesh Babu.

Could rise again

However, it appears that there can be no respite for both customers and jewellers as gold price could touch Rs. 30,000 in the near future.

Though a large number of small retailers are facing the heat, some big jewellery houses claim the rising price has not affected them much.

Vinod Hayagriv, Managing Director, C. Krishniah Chetty and Sons, sounded positive and said: “Customers were aware that the gold prices were set to rise so there has not been a drastic impact on the sales.

“However, they are clearly distressed at not being able to buy the originally intended product or at having been made to purchase it at a higher rate.”