Indian consumers cash in their gold jewelry as prices rally

Rising scrap supplies are likely to cause India's gold imports to continue to fall this year which could weigh on global prices that are trading near their highest since the end of April. (File/Reuters)
Updated 08 February 2019
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Indian consumers cash in their gold jewelry as prices rally

  • Temples and households in India own more than 24,000 tonnes of gold
  • Many consumers have been exchanging old jewellery as they cannot afford to make wedding purchases at the current price

MUMBAI: Scrap gold supplies in India, the world's second-biggest consumer of bullion, may increase this quarter as a rally in local gold prices has prompted consumers to sell old trinkets and jewellery.
Rising scrap supplies are likely to cause India's gold imports to continue to fall this year which could weigh on global prices that are trading near their highest since the end of April. Falling bullion imports could help reduce India's trade deficit and support the ailing rupee.
The country's scrap supplies for the quarter ending in March are forecast to rise above 25 tonnes from 14.1 tonnes during the same period a year ago, said Surendra Mehta, secretary at the India Bullion and Jewellers Association (IBJA).
The gold price rally has been encouraging consumers to book profits on long-held supplies as many think current prices may not be sustained, Mehta said.
Gold prices on the Multi Commodity Exchange of India have jumped more than 11 percent in the past six months and were at 33,035 rupees ($464.65) per 10 grams (0.32 troy ounces).
Temples and households in India own more than 24,000 tonnes of gold, which consumers typically buy during weddings and religious festivals such as Diwali and Dussehra.
In Mumbai's Zaveri bazaar, India's biggest bullion market, tiny shops that buy old jewellery were crowded even as high-end jewellery shops were waiting for customers.
"Consumers want to sell before prices correct. There are a few investors who are also selling coins and bars," said Ashok Jain, proprietor of Mumbai-based gold wholesaler Chenaji Narsinghji, which buys old jewellery.
Many consumers have been exchanging old jewellery as they cannot afford to make wedding purchases at the current price, Jain said as he rubbed an earring against a stone to test its purity.
The sellers included textile trader Paresh Parmar.
"There was old jewellery that we were hardly using. As right now prices are attractive, I decided to sell it," said Parmar, who sold 40 grams (1.3 ounces) of gold worth of 132,000 rupees ($1,857).
Two-thirds of India's gold demand comes from rural areas, where jewellery is a traditional store of wealth. But farmers' earnings have been squeezed recently due to falling crop prices.
Farmers have limited disposable income to make big-ticket purchases like gold, said Mangesh Devi, a jeweller in the western Indian state of Maharashtra.
Additionally many farmers in Maharashtra are short of cash because of a delay in payments for their sugar cane crop, he said.
India's cane farmers are owed 200 billion rupees ($2.8 billion) by sugar mills.
Falling demand for new gold caused India's imports in 2018 to drop 14 percent from the year before to 756.8 tonnes, the World Gold Council said in an estimate released last week.
The surge in scrap supplies could further limit imports, at least in the current quarter, said a Mumbai-based bank dealer with a bullion importing bank.
"Import requirement has been falling due to the scrap supplies," the dealer said. "Jewellers are cutting purchases from banks. They are getting a decent amount of supplies from scrap."


Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 23 April 2019
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Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.