Gold rally gives exit to metal stashed during DeMo | Economic Times

Mumbai: The gold that had changed hands four years ago, in a flurry of panic deals on the night of Demonetisation, is now finding its way back into the market. As the price of the yellow metal surged amid a hunt for a safe-haven asset and the uncertainty caused by the Covid-19 pandemic, people who had bought gold to launder unaccounted cash on November 8, 2016, are offloading it in the market.Within weeks after the ban on 500 and 1000-rupee notes was announced in 2016, more than ₹5,000 crore of gold jewellery and bullion were believed to have been purchased with the de-legalised currency bills. Almost overnight, gold prices had shot to ₹40,000 (per 10 grams) as buyers rushed to salvage their cash.For the first time since then, these buyers — stuck with the gold till now — are cashing in on the opportunity, three persons aware of such transactions told ET. The gold price, hovering around ₹50,000 since end July 2020, touched a new high of ₹55,901 (ex GST) on August 7, 2020.The sale of ‘DeMo gold’, along with a combination of other secondary market sales — primarily under duress — has placed the price of gold in the local market at a discount to the price of imported gold. Thanks to job losses and a cash crunch, the pan-India scrap trade (sale of jewellery for cash) is estimated at 25-30 tonnes in the September quarter, which is twice the 13.8 tonnes reported by the World Gold Council for the June quarter — a period of restricted movement and supply of non-essential goods.“Lot has been spoken of the phenomenal rise one would see in gold loans as small businesses resurrect themselves. But recycling, i.e., sale of jewellery for cash, will also see a natural jump in such crisis times,” said Somasundaram PR, MD (India), World Gold Council, who declined to provide a number for scrap. Amit Modak, CEO of PN Gadgil & Sons, with presence in Maharashtra, Karnataka and Gujarat, told ET that scrap sales across his 29 stores had jumped 25% year-on-year. (However, they were not aware whether part of the secondary sales comprised of gold bought during DeMo.)In the years after DeMo, several individuals received notices from the I-T department, questioning their source of funds. Interestingly, notices were also received by some of the regular customers who had not bought hold on the night of November 8, 2016 — probably because some of the jewellers had shared PAN of these clients either due to non-availability of PAN of actual buyers or protect their identity, and keep tax officials at bay. 78154984“The recent jump in gold prices would be a bonanza for those with NIL adjustments made by tax offices. Now when they go to sell the gold so acquired, they receive payments through banking channels. This means they would either classify these in their books as inheritance or old gold lying for more than a decade,” said Mitil Chokshi, partner, Chokshi & Chokshi.Trade sources also attribute the discount to pawned gold forfeiture by stressed households. “Average ticket sizes for pledging are estimated at ₹50,000-60,000, which obviates the need for PAN (stipulated for transactions from ₹2 lakh onward),” said Rajesh Khosla, president of Association of Gold Refineries & Mints. “Forfeiture of part of this could be inflating the discount.” He pegged the average local discount at $15 an ounce (31.1 gm) to the official rate over the past two months. It had widened to $30 a month and a half ago and was as high as $60-72 in April with supply coming to a stand-still after the lockdown.