(Reuters) – Indian jewelers’ association asked its members to stop selling gold bars and coins, complying with the government’s measures.
All India Gems and Jewelry Trade Federation (AIGJTF), the largest jeweler’s association representing almost 90% of Indian jewelers, asked members to seize gold bullions sales, around 35% of their business. The move is considered direct complying with the Indian government’s measures to curb gold imports for reducing the current account deficit. Reliance Capital, the financial services company, stopped gold-backed funds few days earlier.
The AIGJTF expects around 2,000 retailers out of its 40,000 members to hold gold bullions coins and bars sales at once. The AIGJTF Chairman stressed on helping the government to reduce the current account deficit. He also appealed to the members saying they are “safeguarding” the jewelry industry in India.
India is the world’s number one gold consumer, and most of the gold imported used in jewelry making. The jewelry industry generates employment for the local populace, the most well-known and skilled jewelry craftsmen in the world. Without government’s care, the gold craftsmen might immigrate to other countries in pursue of earning their bread. Moreover, the return of India’s gold black market might return as the demand is culture-based on traditions and religions that can’t be stopped by government’s laws.
The AIGJTF asked the government to reduce the gold import duty from 8% to 4%. The federation argued that gold imports fell dramatically in June, which must have achieved the government’s goal in reducing the current account deficit in India resulted from gold imports.
The domestic gold prices fell to levels almost the same as levels before the rise in import duty. This fall indicates that demand on gold could return. Most of the demand on jewelry is from rural areas. Indian farmers are optimist about income this time of the year, and they will probably buy gold bullions or jewelry with a portion of their earnings as they always do.
According to last month survey by World Gold Council (WGC), 82% of the Indian consumers think the gold price will increase or be stable for the next 5-years. Indians buy gold for wedding traditions as dowry, and for religious offerings. They also see the yellow metal as a safe investment and a hedge for their earnings better than banks. The low interest rates and lack of trust in the banking system in general forced Indians, especially in rural areas, to put their money on gold.