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Rediff.com  » Business » Gold sellers entice customers with discounts

Gold sellers entice customers with discounts

By Dilip Kumar Jha in Mumbai
May 15, 2009 11:25 IST
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Gold retailers in Mumbai offered a discount of Rs 100-150 per 10 gm from Thursday, seemingly aimed at keeping their businesses afloat.

However, sections of precious metals' traders had different views on it. One group called it 'the waiver of premium' while others termed it a 'need-based selling below the market price.' Whatever they called it, the price offered to retail customers was lower than the landed cost of the yellow metal late Thursday afternoon.

According to Ketan Shroff of Pushpak Bullions Pvt Ltd, "Traders are selling at Rs 14,900 -- 14,950 per 10 gm presently, which was Rs 100-150 lower than the landed cost."

He added, "The consumer price depends upon customers' needs as some in dire need of money sell at prices lesser than Rs 14,900 per 10 gm while others attract customers through price negotiations."

Shroff saw very little interest among customers in buying fresh gold. Most customers on Thursday prefer to exchange their used gold with new ones. Therefore, a discount of Rs 7,000-8,000 per kg is a normal phenomenon among the existing customers.

Bhargav Vaidya, an analyst with research firm B N Vaidya & Associates, however, feels that the supply glut of used gold offers little room for a premium. Gold will be offered at a zero premium which otherwise is normally in the $2-3 range under normal circumstances.

Low customer turnout was another reason for retailers preferring to sell gold at lower than the landed cost, he added.

When asked about the sellers' margin, Vaidya said, "Even under these circumstances, they manage at least Rs 4,000 per kg of their own margin."

On Thursday scrap recovery continues in a big way. Around 500 kg is recovered from scrap.

Fortunately, domestic refineries are capable of extracting contaminants including silver, copper and other metals that are used to weld jewellery items and get pure gold to sell at the prevailing market price. As a consequence, used gold is freely bought to recycle in the local refinery.

Suresh Hundia, president of Bombay Bullion Association estimates gold imports to decline in May this year if the present high prices continue. However, if price falls below Rs 14,700 per 10 gm, imports may resume.

Still, April's import figure of 29 tonnes is not achievable, said Hundia. India imported only four tonnes of the yellow metal so far this month.

Meanwhile, standard gold jumped marginally by Rs 85, to close at Rs 14,890 per 10 gm while pure metal also gained in a similar range to settle at Rs 14,960 per 10 gm in Mumbai's precious metals market.

In London, gold remained rangebound, trading at $923.5 per ounce in the early afternoon trade amid strengthening dollar against major currencies.

After hitting a high of Rs 14,900 per 10 gm, gold for delivery in June slipped marginally to trade at Rs 14,833 in early evening trade on the Multi Commodity Exchange.

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Dilip Kumar Jha in Mumbai
Source: source
 

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