Household gold sales rise as citizens struggle with economic effects of Covid-19
Gold loans and gold sales are rising as people struggle with the economic effects of Covid-19 and the trend is expected to continue into Autumn should a third wave of the virus occur.
As the second wave of Covid-19 has pushed over 200 million people back to earning under minimum wage, many households are looking to liquidate family gold jewellery as a last result to free up cash, ET Bureau reported.
“You already had a financial problem last year and you got out of that problem through gold loans,” Chirag Sheth, a consultant at London-based Metals Focus Ltd, told Bloomberg.
“Now again, you are having financial problems this year with a potential third wave on the way, which can again mean lockdowns and job losses. We can expect distress sales in a big way in August and September when the third wave could actually set in.”
This is a trend more pronounced in rural areas hit hard by the second wave of Covid-19. Rural areas generally have higher gold sales as a form of investment due to the fact that there are fewer local banks and gold can be easily purchased and later liquidated.
Where 2020 saw a high rise in loans taken out against gold jewellery, 2021 could see more distress-led outright gold sales. Gold scrap supplies, which come from sales of gold jewellery and are melted down to make new designs, could reach the highest level in nine years, according to Sheth.
Although gold sales in India decreased to the lowest rate in 20 years in 2020, retailers are hoping that pent up wedding demand due to nuptials postponed by the pandemic will boost business. The extent to which India experiences a third wave of the virus will play a major part in deciding how people buy and sell gold.
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