Gold refiners lose bulk business after demonetisation

Scrap gold is seen in storage at Hatton Garden Metals precious metal dealers in London, Britain July 21, 2015. REUTERS/Neil Hall/Files

refiners have had 70-75 per cent less business in the past month, due to reduced supply of scrap from retailers, following the non-availability of cash for purchase of used ornaments.

While consumers are ready to sell used ornaments, jewellers say they don’t have the money, blaming non-availability of cash from banks. Normally, jewellers buy used ornaments and supply these to refineries for converting into pure gold, again supplied to jewellers for making ornaments.

Data from the World Council (WGC) says 80.2 tonnes of gold, equivalent to nearly one per cent of India’s total import of 913.6 tonnes, was recovered in calendar year 2015 by melting at refineries. Between January and September 2016, recovery from scrapwas estimated at 77 tonnes. However, the flow ofhas plunged since the November 8 of Rs 500 and Rs 1,000 currency notes –jewellers are offering cheque for scrap jewellery, while sellers want cash.

“While continues to come into the market for sale, jewellers do not have currency to buy it. Large organised stores with a system for RTGS payment continue to buy but not small jewellers, affecting the refineries,” said James Jose, vice-president, Association of Refineries and Mints.

There are around 35 refineries across the country, in the business of melting used jewellery. In fact, the government’s decision to fix holding by individuals with 100 grams, 250 grams and 500 grams for unmarried men, women and married couple, have impact demand of in India.

“We used to get four-five kg of old for refining before demonetisation, which has come down to 1-1.5 kg today, due to non-availability of adequate scrap for jewellers,” said Satish Pratap, managing director of Kochi-based SPS Refinery.

According to industry estimates, half the business was done in cash before demonetisation. Trade sources say falling prices have turned the market, with a discount to the import price of $5-6 an oz, making the business uneconomical for small refineries.

A number of small scrap refineries have also added a facility to convert imported dore (raw gold) into pure but are waiting for the market to stabilise.

MMTC Pamp, the only primary accredited to the London Bullion Market Association, continues to import dore for refining at its own plant. “Our substantially runs on import of dore and has not been impacted at all. We never dealt in cash,” said Rajesh Khosla, managing director.

Standard at Zaveri Bazaar in this city closed unchanged at Rs 28,180 per 10g on Thursday. Over the past month, the price has fallen seven per cent or Rs 2,150 per 10g.