Explained: Why jewellers are protesting against new hallmark rules and what it means for gold prices
According to the experts, the strike is likely to push gold prices higher
Unhappy with the new hallmarking rules, the Hallmarking Unique ID (HUID), jewellers across the country have decided to go on a ‘token strike’ today, August 23.
Amit Khare, AVP- research commodities, Ganganagar Commodities Limited said, “Gold jewellers across the country have decided to go on a strike today. The strike will be supported by 350 associations and federations from all four zones of the entire gems and jewellery industry”
What’s the new hallmark rule?
Gold hallmarking is a purity certification of the precious metal, and was voluntary in nature so far. Jeweller’s selling non-certified products are to face fines from this upcoming September. According to the new hallmarking rules, that came into effect in June, jewellers are only allowed to sell gold items of 14,18 and 22 carats and are required to hallmark their products. In case they don’t, they face a penalty — pay five times the cost of the product sold or face up to a year of imprisonment.
“Hallmarking of Gold will decrease it’s black marketing and this will have a very positive impact in the jewelry business in long run”, said Khare.
Why are jewellers on strike then?
The jewellers who are protesting have no problem with the mandatory hallmarking of products as such but are unhappy with the process which they feel is lengthy and complicated.
“Yes we are opposing the government decision to introduce the hallmarking process without proper infrastructure. Hallmarking of ornaments is the not an issue at all, everybody is welcoming the move, but the whole procedure is very critical. It generally takes 20-25 days minimum to get back the ornaments and in some cases more than a month.” said Subhra Chandra from PC Chandra Jewellers.
He also said that they understand there may be some technical problem, but government should take ample time to solve this and then make it mandatory.
“BIS website itself is not ready, but they have ordered the jewellers to implement, that is incorrect. Our protest is in this issue. . It will actually make a negative effect on the sale figure and government would loss a substantial tax amount”, Subhra Chandra told Money9 on Monday.
The biggest jeweller’s organisation in Bengal is ‘Swarno Silpo Bachao Comittee’ or SSBC, they also have opposed the decision and join in the token strike. “Government has made stringent law for the jewellers, but the hallmarking centre’s penalty very less so as the responsibility. The technical process is not feasible for us, so we demanded some changes in the process. Hope government will hear us and take steps accordingly.” said Samar Dey, working president, SSBC.
How will the strike impact gold prices?
Anuj Gupta, who is Vice President (VP), Commodity and Currency Research at IIFL Securities said, “This will impact positive on gold price although physical demand of gold is expected to increase in the festival season. Strike may support gold prices and gold prices may trade higher today and in coming days. Gold May test 48500 in coming days.”
On the other hand, Amit Khare said, “We think the above news will not have any negative impact on Gold prices, because hallmarking is a very good decision and necessary for identifying the purity of Gold. The price movement purely depends on demand and supply forces and we think the above news will not have any impact on Gold Supply or demand.”
What should investors do?
Experts say that Gold is looking very attractive at daily technical chart, they believe that any small corrections in Gold prices then it will be a good opportunity for Gold investors.
“Rs 47,000-46,500 are the best investment prices as per MCX October Gold contract, because festival seasons is also coming in India in next 1-2 months and we expect Gold can give 5-10% return in this festival season. So investors should not miss the chance if the price comes to near 47000-46500 range”, said Khare.