Gold sales in Zaveri Bazaar picked up last night

Cash hoarders rush to convert hidden wealth into gold

The crackdown on Rs 500 and Rs 1000 denomination notes has led to a sudden surge in demand for gold. People having huge stash of unaccounted cash are trying to convert their wealth into gold as they fear scrutiny by the tax department if the cash is deposited in banks.

Gold deals were being struck in Mumbai’s busiest gold street Zaveri Bazaar yesterday night at a 25 percent premium over market price, gold traders told CNBC-TV18.

A similar frenzy was seen in Manek Chowk as well, Ahmedabad’s famed gold market.

Traders said that a lot of transactions were done over the phone, and in many cases, jewelers were willing to backdate the entries so as not to arouse the suspicion of the tax authorities. The deals happened past midnight,

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"It will create havoc for a little while and the economy will also destablise,” Gitanjali Gems Chairman and Managing Director Mehul Choksi told PTI.

“But overall, it is going to be good for the country. In fact, the jewellery industry will thrive as people will have more trust on jewellery than currency notes," he said.

In the short run, the jewellery industry will be hit as many cash purchases will be deferred because of the government’s move to scrap Rs 500 and Rs 1000 notes.

(With inputs from PTI)