Despite falling gold prices, inflation and high interest rates have resulted in poor demand for gold during the ongoing marriage season.
Demand has fallen by 80% with consumers not showing any interest in buying new jewellery.
The price of the yellow metal has fallen marginally: it closed on Tuesday at Rs 28,700 per 10 gm, down by Rs20 from Monday's closing. This, despite the severe drop of the rupee against the dollar. Experts said this was because of the poor demand for gold in the domestic market. Jewellers said consumers prefer to recycle old jewellery or use bullion purchased earlier as investments to make ornaments. "There is no bullion sale despite the marriage season. Demand is poor," said Kumar Jain, vice president of Mumbai Jewellers' Association.
Gold purchases by jewellers has fallen by 80%, and and sale of new jewellery has plunged to 20%, he said.
"Many customers are bringing their old stocks for remaking ornaments instead of going for new jewellery during marriages," said Jain. This way, they have to pay only labour charges.
Confirming that there is no demand in the market for gold, Prithviraj Kothari, president of Bombay Bullion Association (BBA) said: "There is a liquidity crisis."
Kothari also blamed the high interest rates behind the liquidity crisis for causing the poor demand for gold.
Nemichand Sanghavi, one of the directors of BBA, said that the price of gold would come down soon. "The rates are too high," he said while agreeing that there is no demand for the yellow metal.
Dimple Gandhi, a Malad resident, who is getting married next month, is having her jewellery remade with new designs. "There is no liquidity to entirely buy new jewellery," said Gandhi.