India's Gold Scrap Biz Soars

Source:

"India's jewelry shops are seeing a 10% rise in scrap sales."

With gold prices running very high in India, jewelry shops are seeing a 10% rise in scrap sales whereas their sales are at a very low level.

Traders say the trend has spread across the country. Farmers sell old jewelry in the beginning of the monsoon every year. Old jewelry sales surpassed sales of new gold with prices at a near record high at over Rs 18,000 per 10 gm.

Usually, farmers sell their gold to buy high-yielding seeds, fertilizers and equipment. Hence, depending on their financial position, many sell their holding during the sowing season between July and August and buy fresh gold if the harvest is good and remunerative. This is a normal trend with gold sales in India.

During monsoon, the sale of fresh gold declines typically. Normally, 30% gold is made available through recycling in India. But, skyrocketing prices have increased old gold's availability. Global consultancy firm GFMS estimated India's total gold demand at 432 tons in 2009.

The World Gold Council, in its latest report, estimated that India's gold availability through used jewelry rose sharply to 200 tons in 2009, which is perhaps the highest.

Monsoon is a healthy season for retailers as used gold is purchased at a discount of 1%1.5%. Also, the making charge (which usually stands at 1%) is not paid while buying such jewelry. Hence, every gram of used gold being resold after recycling fetches a retailer 11%11.5% of the gold price, which is a good business.

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