Asset status

Gold loses the status of the most liquid asset

Gold has always been considered the most liquid asset in this country – at all times people were ready to give money against it. After demonetization, that changed.

Scrap metal dealers seem to be gradually moving towards payment by check or net bank transfer. And customers aren’t ready for it – selling for a check means it shows up in the ledger and long-term capital gains tax is applicable. The concept of gold as an asset capable of obtaining money at any time is evaporating.

This payment revolution was already taking place but very gradually – even farmers had started to move towards the banking mechanism for the sale of products. Suddenly, however, there is no more money in the system. Gold scrap is generally defined as gold sold and silver received. This market in India is 90 to 100 tonnes per year, according to data from the World Gold Council (WGC). When gold prices are higher, the supply of scrap increases, as seen in the June quarter of this year.

If one includes the market for giving up old gold or jewelry for buying new jewelry, then the scrap market is estimated at nearly 300 tonnes per year. According to WGC’s demand trend report for the September quarter, “India is a very good example of increasing recycling. With local gold prices hovering around Rs 31,000 / 10g in the first half of the quarter, consumers – especially in rural areas – opted for cash-out, pushing up the supply of recycled gold at 39 tonnes, its highest level since the fourth quarter of 2012. This increase in local supply has allowed some jewelers to reduce their dependence on fresh imports to meet demand.

Jeweler Choksi Arvind’s Kapil Choksi at Zaveri Bazar here, who deals with old gold, said: are ready to accept payment by check. Previously, his daily purchase was one kilogram for 1,200 grams of scrap gold; this has been reduced to 100-200g per day. “The concept of gold as the most liquid asset has disappeared,” he adds.

A South India-based scrap gold trader said: “It is unlikely to go back to how it was in the past. Especially when the value is over Rs 2 lakh for old gold, scrap traders will certainly avoid dealing in cash. Those who hold unaccounted for gold will find it difficult to trade easily, unlike in the past. ”

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