The surge in gold prices in the past few days has triggered a rush to sell gold in Gujarat and, to a lesser extent, in Maharashtra.
In Ahmedabad's two main gold markets, Manekchowk and RatanPol, only one out of every 10 customers wants to buy gold ornaments or any form of gold. The rest want to sell.
"I had taken a loan from private financiers for my daughter's marriage a year ago. It is difficult for me to pay the interest every month. Having retired, my income is limited. This is an opportunity to pay off this loan at once. So I came here all the way from Naroda to sell gold ornaments," says Hira Desai, a seller in this market.
"I lost a huge amount in business. Thanks to the increase in gold prices, I recovered my money and saved myself from landing in a debt trap," says Satish Dholakia, another seller.
Gold is considered a form of investment by Indians. But with prices shooting up, the public is cashing in. Even so, the trend is largely confined to Ahmedabad and, to some extent, Mumbai.
"The recycling of gold for cash is happening only in Zaveri Bazaar (Mumbai's gold market). In the suburbs, the recycling of gold is restricted to replacement," notes Arvind Kumar, proprietor, Choksi Arvind Jewellers, one of the largest gold ornament buyers in Zaveri Bazaar.
Some jewellers say a rush to sell gold jewellery was seen last year. "People are waiting for gold prices to stabilise before taking a decision," says Bhargava Vaidya, bullion analyst at BN Vaidya and Associates.
The price of gold has been volatile in the past couple of months, with fluctuations at times topping 4 per cent a day. International gold prices have been seesawing between $395 and $407 per ounce in the past month.
Since 80 per cent of India's demand for the yellow metal is met by imports, international price fluctuations have a direct bearing on domestic prices. The domestic price of gold is currently Rs 6,070, lower than the landed cost of imported gold (Rs 6,170 per 10 gram, if the international price of $403 per ounce is converted into rupees).
In Ahmedabad, however, the chief reason people are selling gold is that they get cash on the spot. Selling gold is otherwise a complicated process. Gold is first melted into a form of rod and then the purity is ascertained.
On the basis of the purity, the money to be paid is calculated, taking into consideration the current gold price and deducting Rs 100.