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Ground Report | No panic in gold jewellery market on Rs 2,000 note withdrawal

Some jewellers who sought a premium for gold purchases using Rs 2,000 notes were rebuffed by customers, while others printed posters to lure buyers.

May 23, 2023 / 02:49 PM IST

The withdrawal of Rs 2,000 currency notes has not triggered panic buying of gold jewellery using cash, as witnessed during the 2016 demonetisation.

Jewellers in various cities told Moneycontrol that customers were not desperate to use their Rs 2,000 notes to buy jewellery. Although some jewellers initially demanded a premium for purchases using Rs 2,000 notes, customers weren’t willing to pay anything extra, contending that the bills were still valid.

The Reserve Bank of India said May 19 the Rs 2,000 notes, introduced after demonetisation in November 2016, will be withdrawn from circulation. The RBI gave the public time till September 30 to exchange or deposit the notes in banks or designated RBI branches.

The notes will continue as legal tender, the central bank said. Banks will start accepting the Rs 2,000 notes from May 23.

Also read: RBI declares to withdraw all Rs 2,000 currency notes: All your queries answered

No urgency

Moneycontrol spoke to 10 jewellery shop owners and industry association representatives in New Delhi, Mumbai and Patna, who said there was nothing extraordinary taking place in the market.

“There is no rush and panic-related situation in the market. Some shopkeepers don’t even have a normal flow of customers,” said Yogesh Singhal, president of the Bullion Jewellers Association.

“Yes, we are accepting the Rs 2,000 notes,” said a jewellery shop owner in Greater Kailash, New Delhi.

Some jewellers in Chandni Chowk in old Delhi said they initially tried to demand a premium of Rs 2,000 to Rs 3,000 but customers refused to pay anything extra.

“The day the RBI announced the withdrawal, some shop owners might have tried to take premium, but customers refused,” said a jewellery shop owner who sought anonymity.

“I got some reports that some jewellers tried to sell gold at Rs 63,000-65,000 per 10 grams, but rumours of Rs 70,000-75,000 are completely untrue," said Singhal. Gold was quoted at Rs 61,560 on May 23 in New Delhi.

Also read: RBI’s Rs 2,000 note withdrawal to have little impact on economy

Business as usual

"If somebody is buying gold using these notes, there should not be any issue. There are no jewellers who are charging a premium while accepting Rs 2,000 notes. It is business as usual. All premium-related news are rumours – there is no truth to it," said Surendra Mehta, national secretary of the India Bullion & Jewellers Association.

Sharad Aggarwal, owner of Panchrattan Diamonds in old Delhi, said jewellers are getting “lots of queries” from customers asking whether they are accepting Rs 2,000 notes.

“But those queries are not converting into sales. The rumours are that we are accepting premiums, but the reality is that there's a fall in customers since gold prices are high,” said Aggarwal.

Another jeweller in Delhi agreed.

"We are expecting our sales to increase only when the price of gold falls below Rs 50,000," the jeweller said.

Some jewellery shops didn’t even have regular footfalls in the days that followed the RBI’s announcement.

"The shop is in front of you. Are you seeing any customers here? There is no question of a premium,” said a shop owner in Connaught Place who didn’t wish to be identified, gesturing to his empty store.

According to RBI data, the number of Rs 2,000 notes in circulation declined to 10.8 percent of the total on March 31, 2023. The value of these banknotes in circulation declined to Rs 3.62 lakh crore from Rs 6.73 lakh crore at its peak on March 31, 2018 (or 37.3 percent of the notes in circulation).

"We were expecting a rise in sales after the [RBI] announcement and we were preparing for that, but sales have not happened accordingly,” the manager of a major jewellery brand shop told Moneycontrol, declining to be identified.

At Noida’s Sector 18 jewellery market, some people had started buying gold and silver with their Rs 2000 currency notes, but the volumes were low.

“We have had several customers visit us and buy jewellery. The rush has definitely increased, but the volumes remain small,” said another jeweller in Noida on condition of anonymity. “Most people have a few currency notes lying around their house which they do not wish to exchange in banks. There is no panic or rush as was seen during demonetisation.”

However, some people who walked out of these shops claimed that gold is easily available for cash but a premium is being charged.

“People who want to transact in cash are being asked for a premium of about 8 percent in this market,” Gaurav Khandelwal told Moneycontrol, adding that he did not buy any gold and would rather exchange the money at his bank.

One jeweller, speaking on condition of anonymity, admitted that this might be true in some cases.

“This is being practiced, depending upon demand. There are people who are indulging in buying jewellery at premium rates. People who do not want to transact in cash are being given the gold price on the market,” the jeweller said.

Luring customers

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Some jewellery shop owners tried to attract customers by printing posters publicising the RBI's order and asking buyers to exchange their currency for gold and silver.

“Relax, there is no need to panic! We are still accepting Rs 2,000 notes. Buy diamond and gold jewellery at the regular rates,” said one such advertisement.

“Breaking news! Printing of Rs 2,000 note has been stopped. Buy diamonds and gold at the regular rate. No extra payment required,” said another advertisement.

In some other parts of the country, including Patna, and Mumbai, the situation was largely the same, with jewellery shop owners reasoning that because adequate time has been provided, there is no rush.

Harsh Kumar “ is Correspondent at Moneycontrol based in Delhi. Harsh covers BFSI sector. You can reach him at
Pallavi Singhal is a Correspondent at covering commerce, agriculture and education. With a total experience of four years, she has reported on varied subjects covering crime, courts, civic affairs, health & politics. Human interest and feature stories have always piqued her interest.