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Asian and Middle-East jewellers flood the market after gold rush

Asian and Middle-East jewellers flood the market after gold rush

Jewellers in Asia and the Middle East struggle with displays that are losing their sparkle, as customers rush to cash-in their old jewellery and coin.

Retailers and industry experts warned that if the rush to sell continues it could lead to lower imports in major markets, which would potentially dampen gold's rise.

The spot gold price surpassed $3,000 per ounce on 14 March, and has continued to climb since then to reach a year-to date gain of more than 15%. This is due to a powerful combination between political and financial uncertainties.

This stunning rise follows a nearly 30% increase in 2024. It has led to increased business in India's biggest bullion market, Zaveri Bazaar.

Unmesh Patel, a textile trader from India, said that he made more than 25 percent on four 10-gram gold coin purchases he made less than seven month ago. The Indian government had cut import duties for the metal.

He said, "I decided to sell rather than wait for the prices to rise even further."

Since July when import duties were reduced, the domestic gold price in India has risen by more than 32 percent, reaching a new record of 89 796 rupees for 10 grams.

"If prices remain this high throughout the year, India's total demand could fall by over 30% in 2025," stated Prithviraj Kottir, President of the India Bullion and Jewellers Association.

He added that "buyers find it difficult to keep up with price increases, and their budgets don't grow either."

WEDDING SEASON SLUMB

Dealers report that despite the wedding season in India being in full swing jewellers have seen less than half of their usual customer traffic.

Even those who make purchases, like Vaishnavi M. the bride-to be, opt to swap old jewellery for new in order to minimize costs.

Vaishnavi M., from Kerala in southern India, said: "The rates would ruin my wedding budget...the plan was to exchange some old jewellery of my mother."

India's scrap supply of gold totaled 114.3 tons in 2018. The World Gold Council predicts that this figure will rise to 2025.

Imports are the main source of gold for India, and China is the largest consumer.

According to a Dubai bullion dealer, jewellery hubs across the Middle East have seen a similar drop in demand.

The dealer stated that "Indian tourists shop in Dubai a lot to avoid import duties, but they are also holding back."

Andrew Naylor is the Head of Middle East Public Policy and Middle East at the World Gold Council. He said that 60% of the gold consumed in the UAE goes to jewellery. When prices are high, the consumers will purchase lighter products.

He said, "Our data shows, however, that the value and volume of jewellery purchased last year has increased despite lower sales."

The lacklustre retail purchases seen in China 2024 are continuing. People who want to own physical gold can buy coins and bars because jewellers charge extra for the craftsmanship. Peter Fung is the head of Wing Fung Precious Metals.

There are more gold sellers than buyers in other major Asian markets.

Customers are opting for cheaper jewellery, or selling their existing gold to secure a loan or sell it.

Brian Lan, the managing director of GoldSilver Central in Singapore, reported that five new shops have opened recently around Chinatown, selling gold-plated sterling silver.

Lan said, "We've seen clients bring back jewellery they don't use or that is broken from home to liquidate."

These trends show the delicate balance that exists between gold's value as an asset and its role as a culturally traditional commodity.

Analysts say that the future outlook for jewellery is gloomy. However, investment demand for gold will likely remain strong.

(source: Reuters)