Tight restrictions cause gold sales to drop by around 50 percent

By

Isabelle Crossley

Published
Sep 21, 2017

As anonymous cash-based purchases of gold are being strictly regulated, sales have halved over the last month, despite the fact that the holiday season is fast approaching.

India’s holiday season has already commenced for many and huge sales are being rolled out by most retailers in the hopes of luring customers for their holiday shopping. This season, which runs into November, usually accounts for 60 percent of India’s yearly gold sales total but high gold prices this year, driven up in part by the introduction of the GST in July, have caused sales to plummet at this crucial time.

From August 23, the government rolled out tighter regulations for gold purchases made in cash. Previously, shops selling gold only had to fill in “know your customer” (KYC) information for cash purchases made at a value of two lakh rupees or more (approximately 3,100 dollars), however, that figure has been reduced to only 50,000 rupees (approximately 800 dollars). These regulations were brought in as part of the Prevention of Money Laundering Act (PMLA) and have consequently turned shoppers away from making expensive jewellery purchases.

The drop in demand for gold has taken a toll on both retail and business to business transactions. The National Secretary of the India Bullion and Jewellers Association, Surendra Mehta, commented: “There were very little footfall in jewellery exhibitions that took place in the last fortnight. For instance, the Jewellery Wonder Show held in New Delhi between September 16 and 18 did not evoke much response. So the drop is being noticed both in the B2C [business to customer] and B2B [business to business] segments.” The drop in gold sales has been felt across the board and the real question is whether or not sales will pick up as the holiday season progresses.