Jewelry Sales take a hit, as Demonetization Gets a Hold of the Currency

City wholesale and retail market for bullion, witnessed a lacklustre of trade as sale of jewelry of INR 500 and INR. 1,000 notes.

India: The government has taken this initiative to clamp down on black money and corruption. People are now withholding their purchases of gold and jewelry till higher denomination notes will come under circulation. Store franchises like Zaveri Bazaar, Tanishq, TBZ etc. catered to empty stores the day after the announcement. The bullion market has not had a very good year due to lower demand despite ongoing wedding season. People frantically bought gold bars and jewelry till late midnight. There are liquidity crunch as new notes are yet to be circulated in the market while not adequate stock of Rs 100 notes because more than 70 % transactions are done with high denomination notes. The government also announced that jewelry shops will be accepting INR.500 and INR.1000 notes till November 10, 2016, but the lack of smaller currencies has posed some issues in smooth transactions. People were forced to buy unwanted items in order to bill a round figure. Jewelers opened their shops past midnight in order to grasp as much sales as possible.     

According to TechSci Research, the move to demonetize the currency will prove out to be effective and useful in the long run. Government’s decision to ban old INR.500 and INR.1,000 notes will see people having more faith in precious metal rather than currency notes. But perhaps, the biggest factor affecting the domestic demand is the continued push towards regulation and accountability that the government is levelling in general, including the gold market.