Gold demand on Akshaya Tritiya, a ritualised date for buying the metal in India, was subdued on Friday, as economic uncertainty forced people to put off purchases.
Jewellery demand may have fallen 10-15 per cent overall, with small jewellers likely seeing bigger falls. The volume of gold exchange-traded funds was Rs 71.27 crore on Friday, a 95 per cent fall compared to Rs 1,306 crore on the same festival day last year.
This year, gold import estimates are low, too. In 2013, Akshaya Tritiya fell on May 13 and gold imports from April till mid-May were around 200 tonnes. Gold imports for April 2014 are estimated at 30 tonnes.
"Most organised jewellers have seen a decline of 10-15 per cent in gold demand today. Organised players push sales harder by offering incentives and budget jewellery," said Vijay Jain, CEO of Orra Jewellery, which has 35 stores.
Gold prices crashed a month before Akshaya Tritiya in 2013 and this led to a buying frenzy. The Reserve Bank of India had to bar banks from importing gold on a consignment basis.
There were no delivery premiums on physical gold last year. On Friday, the premium was $121 an ounce; this was just $30 an ounce in mid-March, because of the scarcity in delivery.
Somasundaram PR, managing director, World Gold Council, said, "Reports coming to us from southern India are very good for gold jewellery sales compared to last year's Akshaya Tritiya. Consumers elsewhere have resumed token sales in preparation for buying more gold in the coming months, as uncertainties reduce and the money spent on the election is likely to come into gold." "There are widespread hopes among consumers that the import duty will be cut to eight per cent and there could be some more procedural relaxation in imports, which could make gold buying cheaper," he added.
Last year, the rupee was stronger, gold prices were down around 10 per cent and there were no restrictions on imports. "Gold demand around Dhanteras was softer. Compared to that, prices have stabilised and sentiment has improved," the World Gold Council's Somasundaram said.
The jewellery business is also hurting. "Interest costs - because gold loans are no longer available-- are much higher. Delivery of official gold is an issue which raises the cost of carry. Inventories with jewellers have contracted, hurting their margins," said Jain of Orra.
For investment in gold-exchange traded funds, the trade on the NSE was Rs 53.05 crore and on BSE Rs 18.21 crore. The number of units traded this year stood at 368,000.
"Banks are allowed to sell gold only to exporters and since mutual funds are not exporters they are not able to source gold," said Lakshmi Iyer, head, fixed income and products, Kotak Mutual Fund.