Rajendra Jadhav/Reuters


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While high-end jewellery shops in Mumbai`s Zaveri bazaar are scratching for customers after a jump in local gold prices, Jitendra Jain, a scrap gold buyer in India`s biggest bullion market, is doing brisk business.


"Since prices have risen, I decided to sell old jewellery that I stopped using long back," said homemaker Sima Singh, who queued for nearly an hour at Jain`s tiny shop to sell gold bangles that she had bought two decades ago.


Thousands others have sold their jewellery in recent weeks with local gold prices hitting a near three-year top. More such sales would bode well for the Indian government that has been urging people to recycle unused gold in order to cut costly imports by the world`s No.2 bullion consumer.


Demand for new gold has been so weak in the past few months that India`s imports over January-June halved from a year ago to 200 tonnes, data from consultancy Thomson Reuters GFMS shows.


Arrivals for the year could hit 600 tonnes if prices stay near current levels, said Bachhraj Bamalwa, director at All India Gems and Jewellery Trade Federation.


While this indicates an expected pick up in demand in the second half, when the festival and wedding seasons kick in, it would still be the smallest annual import since 2003.


India shipped in as much as 904.5 tonnes last year, when global spot prices fell more than 10 percent.


World prices have risen 25 percent so far this year, after plunging 36 percent in the past three years, driven in recent weeks by an economic uncertainty stemming from the United Kingdom`s vote to leave the European Union.


However, worries prices may move south again are prompting consumers to sell and bank profits while they can.


"The price correction since 2013 has changed perception," said Mukesh Kothari, director at dealer RiddiSiddhi Bullions in Mumbai. "Earlier consumers were assuming gold prices will go up and up only. Now they have realised they could correct and they need to enter the market at the right time."


TIME TO SELL


Indian gold prices hit a record high of 35,074 rupees ($522) per 10 grams in August 2013, falling then to a four-year low of 24,451 rupees in 2015, leaving many investors in the lurch. Last week, prices breached the 32,000-rupee mark.


"I was waiting for prices to rise above 30,000 rupees. As they did, I decided to sell," said Aneesh Shah, who had bought some gold coins in 2005.


"I will buy again if prices correct to 25,000 rupees."


The rise in scrap supplies has forced dealers to offer hefty discounts in India. Earlier this month, discounts hit a record high of $100 per ounce versus the global spot benchmark amid continued weak demand for new purchases.


"Many investors bought gold at higher levels during the rally and got stuck," said Jain from Zaveri bazaar, as he rubbed a gold coin against a stone to test its purity. "Now, they are getting an opportunity to sell."