Home BusinessScrap sales up 30% on profit-taking
The sales of used gold, known as scrap gold in commodity parlance, shot up 25-30 per cent on Wednesday as retail investors rushed to cash in on high prices before a correction, which analysts forecast as imminent.
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Normally, jewellery retailers collect 25-30 gm of used gold against the sale of every 100 gm. However, the recovery of scrap intensifies if prices of the precious metal head north.
Standard gold set another record on Wednesday in Zaveri Bazar, the famous jewellery market in Mumbai, where almost 65-70 per cent of the city’s trades are executed. It jumped to a historical high of Rs 16,630 per 10 gm, a rise of Rs 390 or 2.4 per cent, from the previous close of Rs 16,240 per 10 gm. Pure gold also followed, to gain Rs 390 from the previous day’s level at Rs 16,325 per 10 gm, to close on Wednesday at Rs 16,715 per 10 gm.
“From 3.5-4 kg every day, we collected about 6 kg today,” said a trader. NIBR Bullion’s Harmesh Arora said the effect would be fully seen in the form of scrap recovery after two-three days, when remote consumers come to know about record high price. Generally, retail investors from remote villages come for selling in masses, to divert funds into other asset classes, including real estate. Since real estate is struggling to pick up, gold investors have started coming off from the precious metals asset class to invest in real estate, in anticipation of good future earning possibilities.
Ashok Minawala, ex-chairman of All India Gems & Jewellery Trade Federation, however, said that consumers are currently keeping their stocks in anticipation of price escalation in future. India is a price-sensitive gold consuming country. Although the country is the world’s largest consumer of the yellow metal, any price spurt hits consumers sentiment badly.
GFMS Ltd (formerly Gold Fields Mineral Services), a London-based independent precious metal consultancy, recently stated that global scrap recovery surged to a record high of 900 tonnes during the first half of the current calendar year. The rise in scrap sales was mainly a first-quarter phenomenon, wherein it rose by 58 per cent, year-on-year.
However, in the second quarter, scrap availability went up only by 13 per cent. The consultancy said volumes in the second quarter were low due to the lack of further upside momentum in gold prices, and the fact that much of the near-market supplies were sold in the first quarter.
India accounts for about a fourth of global scrap sales. However, scrap sales were also hit due to consumers’ previous selling when the price sustained at Rs 15,500 per 10 gm for over a fortnight last month.
“There is not much gold left for sale, with consumers preferring to hold the yellow metal,” recently said Ajay Mitra, MD, Indian Sub-continent, for the World Gold Council.