MUMBAI // Record high gold prices in India are weighing on jewellery businesses, which are suffering declines of up to 80 per cent in sales, as customers stay away.
Gold prices in India have hit all-time highs above 31,000 rupees per 10 grams in the past few days, boosted by a global rise in gold prices and a weak Indian rupee.
This is bad news for jewellers such as Dimpesh Jain, who runs a shop called Motaba & Sons on Colaba Causeway in Mumbai.
"Because of the rise in prices, during the main season we are sitting without any business now," he said.
He estimated that sales were down by 75 per cent compared with the same time last year.
The festival season in India, which started this month, is normally a peak period for gold demand. India is the world's biggest consumer of gold jewellery.
"Once August comes, we are prepared with our fresh designs and we're on our toes," Mr Jain said.
"We expected a boom in August. But nobody has money, and people are saying 'we will wait'."
Across the road, Lalit Jain, the owner of Surana Gold, said that sales at his jewellery shop were down 80 per cent compared with last year.
"All the items are costly," he said. "Money is very tight."
An import duty increase on gold introduced this year has not helped the situation.
In addition, a weak monsoon was said to be further slowing demand because of its negative affect on the rural economy, which supports millions of Indians.
Gold investment and jewellery demand in India fell to 181.3 tonnes in the second quarter of this year, down from 294.5 tonnes during the same period last year, according to data from the World Gold Council.
Investment demand in India, at 56.5 tonnes, was less than half the level it was in the second quarter of last year.
Demand for gold jewellery in India declined 30 per cent to 124.8 tonnes during the quarter, the data showed.
"The fluctuations in the exchange rate and the rise in the gold price were compounded by domestic inflation and concerns over a weak monsoon season," the council said.
"The higher price is having an impact in domestic gold demand," said Madhavi Mehta, an analyst at Kotak Commodity Services.
"Apart from higher prices, low rainfall this year is also expected to affect gold demand later this year.
"The Bombay Bullion Association believes that India's gold imports during the peak demand season of September to December are likely to slump 40 per cent on the year to 200 tonnes due to of a weak monsoon, fewer wedding dates and high prices."
Despite their growth, global gold prices have not returned to the record levels they reached last year, with the depreciation of the rupee against the US dollar accentuating prices in India.
"International gold prices have rallied in the last few days on hopes that central banks will continue to take monetary easing measures to support their economy," Ms Mehta said.
"The Indian rupee has depreciated in the last few months amid a weakening outlook of the Indian economy."
Ms Mehta added that the outlook for gold was still bullish and that prices in India could approach 32,000 rupees per 10 grams.
Praveen Jain at Fagniya Jewellers, another store in Mumbai, said that his business was also suffering.
"We have very little sales, only inquiries. You can't do anything."
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