Home Commodities Cash Ban in India Causes Gold Sales to Plummet

Cash Ban in India Causes Gold Sales to Plummet

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Indian Traditional Gold Necklace with White pearl
Indian Traditional Gold Necklace with White pearl
Indian Traditional Gold Necklace with White pearl

India’s demonetization strategy is causing gold sales to plummet. The World Gold Council (WGC) released their gold market outlook for 2017, putting India in the spotlight. The country removed 85% of their cash out of circulation.

A temporary negative effect on the country is expected as a result of the transition to new notes and payment schemes.

India is one of the world’s largest gold-buying countries. Jewelers are suffering from plunging sales in the country. Major retailers in the country don’t accept credit cards, leading to a primarily cash industry. Consumers carry less cash with the rise of credit and debit card usage. The removal of the Rs 500 and Rs 1000 notes has harmed the country’s economy.

Disruption in cash circulation is eroding the country’s gold demand.

The WGC forecasts gold imports may be cut in half in 2017, leading to the lowest import levels in the past 8 years. The Council estimates that a seven-year low in gold demand was reached in 2016.

Foreign bullion purchases will decline to 350 – 400 tons, down from 575 tons in 2016.

Prime Minister Narendra Modi enacted currency policy changes to curb corruption. Jewelers protested the excise tax on jewelry manufacturing and the push for financial system clarity in India. Black market transactions were the focus of Modi’s sweeping changes.

Restrictions on cash withdrawals at banks and ATMs remain in place, furthering damaging the economy.

A large portion of India’s agriculture villages receive their wages in cash. The Central Bank estimates that 600 million Indian residents likely don’t have a bank account. The agriculture communities account for 60% of jewelry purchases in the country.

Industry estimates suggest gold sales will return to normal after the midpoint of the year.

Modi’s government seeks gold market transparency to curb illegal activity. Investors choose gold because it’s difficult to trace. Imports on the bullion have experienced three tax hikes since 2013.

Engaged couples in India are reporting difficulty buying wedding rings since the cash ban was put in action. Bankers hope that wedding season will revive the gold industry. Newlyweds account for 65% of the country’s gold buyers.

Individuals selling gold are turning to online outlets to sell their jewelry because they’re not setup to accept credit cards (Click Here to learn how to sell gold online).

Large, brand-name stores in the country accept credit cards at a premium to the customer. Brides- and grooms-to-be hope that jewelers will accept card payments after the cash crunch subsides.

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Stephanie Caudle
Stephanie Caudle is a mother, wife, author, AIDS advocate and Web Marketing Consultant. She seeks to inspire, encourage and motivate young women. A former ambassador for Source Hip Hop Magazine and the iconic brand (RED) Stephanie continues to hold true to her entertainment roots as the Managing Editor of her own site "She’s My Superwoman", a website dedicated to showcasing women in health, fitness, fashion, politics, entertainment and business who have overcome great obstacles in order to become the women they are today.

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