Kochi: The nationwide lockdown imposed in the aftermath of the COVID-19 pandemic and the soaring price of the yellow metal have battered gold jewellers in Kerala.
Many jewellers now have little hope of making good the huge losses sustained in the remaining months of the year.
Kerala records the highest monthly per capita consumption of gold ornaments in the country, but the present impasse has erased around Rs 20,000 crore from its normal yearly earnings.
“The annual turnover of gold jewellery sector ranges from Rs 50,000 to Rs 60,000 crore in the state. There has been a 30 per cent plunge in sales this year on an average,’’ says B Govindan, president of All Kerala Gold and Silver Merchants Association.
“Even now the formation of new containment zones is affecting business”.
The jewellers say the lockdown restrictions necessitated by COVID-19 is the key factor that has battered the sector.
The runaway rise in gold prices comes only next in denting the revenues of the industry.
The lockdown imposed initially from March 25 forced a total closure of jewellery showrooms causing maximum damage.
The impact of the pandemic on consumer spending was palpable.
“Salary cuts and job losses affected buying of gold. We lost out on gold buying spree during Akshaya Tritiya, Vishu and Ramzan seasons. We are now looking ahead to Diwali and Dhanteras,’’ says Joy Alukkas, chairman of Joy Alukkas group.
Since the opening of showrooms in May, jewellery sales have slightly recovered thanks to wedding purchases. However, it is yet to reach pre-COVID levels.
“Our business is 70 to 80 per cent of the normal. While other expenses for wedding have come down, gifting of gold has remained unaffected,’’ points out Malabar Gold chairman M P Ahammed.
Kalyan Jewellers, which is going for a Rs 1,750 crore IPO, stresses on the resilience of wedding-related jewellery, which it holds as the highest selling product category, in its draft prospectus.
“Despite the lockdown, wedding-related jewellery demand has remained robust as weddings have largely continued to occur, either within homes or on a smaller scale. As jewellery remains an integral part of Indian weddings, this area of spending has remained resilient and has been further buffered by the other wedding-related cost-savings that have accrued from holding smaller scale celebrations due to the COVID19 pandemic,’’ the prospectus points out.
With investment flowing into gold from equity markets, the gold price soared as much as 40 per cent during last six months with one sovereign (8 grams) touching a historic peak of Rs 42,000 in August. Yet, many jewellers believe that the rising value of gold has reinforced people’s confidence in gold.
“Married women are encouraging buying of gold for their sisters' wedding, seeing the rapid increase in the value of gold,’’ says Govindan, who is also the MD of Bhima Jewellers.
Customers are increasingly looking at the soaring price of the yellow metal as an opportunity to exchange old ornaments for new ones.
The rise in recycled gold had been a trend seen from last year when prices gradually began to get dearer. As per the report by the World Gold Council, the recycled gold saw a 37 percent increase to 119.5 tonnes in 2019 from the previous year.
It has become more popular in 2020, with gold prices shooting through the roof. The jewellers, on their part, have encouraged the exchange of old ornaments with discounts.
“This is one positive change observed during the COVID-19 pandemic.
It will help bring out the gold parked at homes, thus helping to reduce dependency on illegal imports which have gone up in recent times," says M P Ahammed.
Even for marriages, many are opting to exchange old ornaments, so that they don’t have to cough up a large sum for buying jewellery.
Advance booking of jewellery is also on the rise. “After touching a new high the gold prices have dropped. Fearing that the yellow metal may again become costly, many are booking ornaments at current prices,’’ observes K Surendran, owner of Archana Jewellers at Koduvally near Kozhikode.
He believes that the reports of probable COVID-19 vaccines may have played a part in the current fall in gold prices from the peak rate.
“At any rate, the gold sovereign price may not go below Rs 35,000.’’
Some experts expect the gold prices to remain on the higher side.
“What has happened now is just a technical correction. The current international factors indicate a bullish trend for gold in the next few years, though it may not be at an extreme level witnessed this year,’’ says V Hareesh, Head of Commodity Research at Geojit Financial Services.
The impact of a probable discovery of vaccine has already been factored in the price correction and hence the gold prices may not fluctuate much when it hits the market, he says.
(P K Krishnakumar is an independent journalist based in Kochi)