Long queues were seen outside jewellery stores on Tuesday night as consumers tried to convert their Rs 500, Rs 1,000 currency notes to gold. However, that trend is expected to die down from Wednesday, with jewellers reluctant to accept the notes now that they have been scrapped by the government.
Jewellers were accepting the notes last night as they could convert remaining gold carried from the Diwali stock. These can be shown as Diwali sales. Some jewellers in Mumbai were also accepting cash on Wednesday morning, related to the unsold stocks.
However a majority of jewellery shops in Mumbai displayed empty shelves as “transactions have been postponed till the arrival of fresh stock which can be purchased only with the new currencies that too with the limit of Rs 2 lakh for non-PAN card holders,” said one jeweler in Kandivali, a western suburb of Mumbai.
The demonetisation of these currency notes is likely to hit cash purchases of gold and jewellery at least in the short-term, say jewellers. This comes at a time high value purchases had already been impacted due to the mandatory requirements of pan card details on transactions over Rs 2 lakh.
“From today, we will not accept Rs 500, 1,000 currency notes. There will be a confusion among consumers. There has been a drop in high value sales due to the pan card issue, and with this move (scrapping notes), we do see cash purchases coming down for at least a few days,” said Ashok Minawala, director, All India Gems and Jewellery Trade Federation.
Others, like Aditya Pethe, director of WHP Jewellers also said the Rs 500, Rs 1,000 currency notes will not be accepted at their stores.
“There will be a lot of immediate panic. We do expect sales of gold and jewellery getting temporarily impacted, but things should settle down over the next 8-10 days, “said, Aditya Pethe, director, WHP Jewellers.
There is a huge unorganised market in the jewellery trade, where sales largely happen via cash. Trade sources say while some people may look to park money here through gold, the government restrictions on how much currency can be withdrawn or exchanged, will hit lot of this business too.
Traders say there is still a confusion on how much of the Rs 500, 1,000 currency notes they will be allowed to exchange in value and what kind of personal details they will have to submit, while exchange, so even the smaller players may be unwilling to accept these currency notes from customers.
As such, jewellers expect purchases via credit/debit cards and cheque to rise steadily.