Indian gold jewellers are stuck between a rock and a hard place due to a compulsory hallmarking regulation that is set to take effect from January 15 next year, according to traders.
The regulation will mean that jewellers will have to liquidate at least 300 tons of gold by the deadline and replace them with fresh stocks.
However, sales have been flat this year amid a nationwide lockdown that was imposed to contain covid. Therefore, jewellers plan to request Commerce Minister Piyush Goyal to defer the hallmarking deadline by two years, said Praveen Khandelwal, Secretary General of the Confederation of All India Traders (CAIT).
“The government gave a time of one year to the jewellers to liquidate their old stock. However, due to COVID-19, trading activities across country got highly disturbed and virtually there is no sale since February which deprived the jewellers to liquidate their old stock,” Khandelwal told indoasiancommodities.com.
The hallmarking regulation is being introduced as gold retailing in India is dominated by small neighbourhood shops, who sometimes cut corners and cheat customers. India along with China rank as the two largest gold consumers.
Shops open, but no customers
Though the nationwide lockdown has been eased since July and retail shops have opened for limited hours, jewellery customers have been few and far between.
This is because of the typically lean summer season period ahead of festivals and weddings in India. Jewellery buyers have also been put off by record high prices tracking international markets.
There are about 300,000 jewellers all over the country and if each of them on average has a stock of even one kilogram of gold, then there are about 300 tonnes piled up, Khandelwal said.
In the current business situation, jewellers would need at least two years to liquidate the old stocks and to comply with the provisions of Hallmark, he added.
Prices of gold and silver are expected to rise further in coming months during the upcoming festival season, when Indians typically buy some amount of gold because its considered to bring good fortune.
Indian gold prices are hovering just above Rs 50,000/10 grams currently and silver at eight-year of 62,000 per kilogram.
Gold prices are expected to touch Rs. 55,000/10 grams by Diwali, the festival of lights that will be celebrated on November 14 this year, said Pankaj Arora National Convenor of All India Jewellers and Goldsmith Federation.
Gold and silver prices have risen by 28%-30% since just prior to the lockdown that began on March 22.