Trade with Commodities: Sales of scrap jewellery gain pace as gold sparkles

Monday, June 1, 2009

Sales of scrap jewellery gain pace as gold sparkles

SCRAP gold sales in local jewellery markets across the country have picked up, albeit at a gradual pace, over the past few days. While gold in the overseas market has risen by almost 10% over the past one month to $985 an ounce (31.10 gm), a 5-6% appreciation in the rupee against the dollar has limited the upside in rupee terms. This, in turn, has pre-empted a large offloading of scrap gold in the local market.
    Against the 10% rise in overseas gold, standard gold in Mumbai has climbed by around 5% to the current Rs 14,965 per 10 gm since May. Scrap gold sales momentum, said bullion analysts, marked a gradual increase as the yellow metal breached Rs 14,500 and has come close to testing the Rs 15,000-mark.
    "A small amount of scrap has started coming to the market at these price levels," said Bhargav Vaidya, proprietor of bullion trading house B N Vaidya & Associates. He added that most of the scrap was in the form of light weight jewellery. Ashok Jain from Chenaji Narsinghji echoed the same and said: "Scrap sales of ornaments have started since the past two to four days."
    A bullion dealer at a public sector bank said that parity between the bank rate and the local market rate would diminish as scrap sales increase. "Once scrap flow increases on expectations of benefits from increased prices, more scrap will enter the market and this will reduce the market rate vis-a-vis the bank rate of gold," he said. He expects the price to breach $1,000 level before correcting.
    However, prominent gold merchants like Jugraj Kantilal said prices need to move further up for scrap sales to begin in earnest. "Sellers are still waiting since they have seen prices crossing Rs 15,600 in the past," said a person from the firm.
    Buyers, on the other hand, are awaiting a correction in prices though some jewellers and bullion banks are still witnessing some sales due to the ongoing wedding season. "Indian buyers are comfortable at Rs 14,000 levels and they will sell above Rs 15,000 level. For real good buying, prices should hit Rs 14,200-Rs 14,300 level," said a trader with a prominent foreign bullion bank.
METAL MANIA
Against 10% rise in global gold, prices in Mumbai has climbed by 5% to Rs 14,965 per 10 gm on Monday
Scrap gold sales momentum, according to bullion analysts, marked a gradual rise as the yellow metal close to testing Rs 15,000-mark