Indian Gold Book:Indian Gold Book - Gold Bars Worldwide

TRADITIONAL JEWELLERY RETAILERS
Coins and bars
The proportion of coins and bars received as payment is generally recorded as low. A typical proportion is less than
1% - 2%, but it can be as high as 5 - 10% in some outlets.
While coins were usually used, NRI’s often use small bars acquired from outside India.
Some urban retailers expect the proportion to rise as some of their customers are buying more coins for accumulation and
gift purposes than in the past. They anticipate that more than 50% of these coins will eventually be converted into
jewellery.
BUY-BACKS FOR CASH
The buy-back of old jewellery for cash is significant, but extremely difficult to quantify nationally.
The variation among retailers is marked, even in the same locality. Some also confused buy-backs for cash with exchange.
In some cities (notably in Mumbai), independent scrap merchants also account for a significant amount of buy-backs.
In 2001, among large urban retailers, buy-backs as a percentage of gold jewellery sales were reported to range between
1% and 10%.
Among rural and smaller urban retailers, it ranged between 5% and 40%.
During visits to the west and south in May 2002, however, almost all urban and rural retailers observed that the level of buybacks
had increased significantly due to the high gold price, in some cases the percentage exceeding 50% of gold jewellery
sales. When combined with an increased level of exchange, at times some had no need to buy TT bars.
Anecdotal evidence suggests that in 2001 buy-backs nationally may have been as high as 10% of gold jewellery sales.
A conservative estimate is that it was around 7%.
It can be stressed that many retailers find it difficult to differentiate precisely the split between old jewellery, coins and bars
acquired through exchange and through buy-backs for cash. The important point is that recycling in all its forms is
substantial, and in 2001 appears to have provided 40% or more of the gold used for jewellery fabrication.
General retailer comments on the nature of buy-backs, and the propensity of customers to sell their old jewellery, can be
recorded.
• Urban high and upper middle classes (includes large farmers) do not normally sell back their jewellery.
• Middle and lower classes in urban and rural areas tend to sell back old jewellery, including wedding jewellery, when there
is an economic “necessity” to do so.
• Most customers, who sell back jewellery, would try to replace some of the jewellery when their financial circumstances
improved.
• Although the selling back of jewellery is more common in rural areas, many farmers also use their jewellery to secure
loans from moneylenders and banks. This practice inhibits the level of buy-backs in some States.
• Rural buy-backs also tend to be sporadic. Farmers tend to sell back more jewellery during the monsoon season to cover
family costs when little or no agricultural income is generated.
• In the view of some retailers, customers tend to plan their selling back (unless an emergency occurs such as the need
for medical treatment) to coincide with a known future expenditure. If the gold price rises unexpectedly, many would
take the opportunity to sell sooner the jewellery that they would have sold anyway.
Retailers observe generally that their level of buy-backs over the period 1998 - September 2001 was relatively stable. The
higher level of buy-backs (and exchange) in the first half of 2002 is mainly the outcome of gold jewellery’s sensitivity to a
significant increase in the gold price.
A scrap dealer in Mumbai buying back old gold jewellery for cash when the gold price spiked in May 2002.
AN INTRODUCTION TO THE INDIAN GOLD MARKET 109