With gold prices ruling very high in India, gold scrap sales showed huge increase in jewellery shops.
In fact, jewellery shops are seeing a 10 per cent rise in scrap sales whereas their sales are at a very low level.
Traders say the trend has spread across the country. Farmers sell old jewellery in the beginning of the monsoon every year. Old jewellery sales gave surpassed sales of new gold as prices are at a record high at over Rs 18,000 per 10 gm.
Usually, farmers sell their gold to buy high-yielding seeds, fertilisers and equipment. Hence, depending on their financial position, many sell their holding during the sowing season between July and August and buy fresh gold if the harvest is good and remunerative. This is a normal trend with gold sales in India.
During monsoon, the sale of fresh gold commonly declines because this is not the time for weddings or other festivities.
Normally, 30 per cent gold is made available through recycling in India, the world's largest consumer. But, sky-rocketing prices have increased old gold's availability. Global consultancy firm GFMS Ltd estimated India's total gold demand at 432 tonnes in 2009.
The World Gold Council (WGC), in its latest report, estimated that India's gold availability through used jewellery rose sharply to 200 tones in 2009, which is perhaps the highest.
Monsoon is a healthy season for retailers as used gold is purchased at a discount of 1-1.5 per cent. Also, the making charge (which usually stands at 10 per cent) is not paid while buying such jewellery.
Hence, every gram of used gold being resold after recycling fetches a retailer 11-11.5 per cent of the gold price, which is a good business.
Gold prices are likely to move in a narrow range of Rs 18,300- 18,600 per 10 gm. They may surpass the range in case overseas funds move in a specific direction. However, much will depend on how the yellow metal moves in the overseas markets and the Indian rupee behaves against the dollar.