Bombay (AFP)

With the surge in gold prices and the economic shock of the coronavirus pandemic, Indians are turning away from the precious metal they are usually fond of, putting jewelers on technical unemployment.

Two and a half months after the lifting of national confinement in India, the Zaveri Bazaar in Bombay, the country's largest gold market of 1.3 billion inhabitants, remains deserted. Most of the stalls are closed and no customers are in sight.

"We've been running this shop for 40 years and I've never seen business go so badly," laments Madhubhai Shah, a 75-year-old jeweler who is among the few to have reopened his business.

This Bombay market was hit hard by the confinement decreed at the end of March, which led to the flight of millions of migrant workers - including many gold artisans - from large cities for lack of work.

"70% of our artisans have returned to their villages and the production workshops are all closed," Madhubhai Shah told AFP.

The increase in gold prices of about 30% this year and the uncertainties related to the health situation encourage few Indians to spend crazy on jewelry. India is the world's second largest consumer of gold, behind China.

Even the approach of the wedding season, which traditionally begins in October and sees families shedding small fortunes, has little influence on the mood of households and is not pushing them for the moment to buy.

Chiranjeevi Ahire and his fiancée have thus decided to break with customs for their wedding in December. They will not buy gold or jewelry, although this gesture is normally seen as auspicious and helps to mark social status.

"Before, we wanted a great wedding and follow all Indian traditions like our parents," the Bombay-based marketing manager told AFP.

"But with the pandemic and the latent uncertainty in the job market, we have decided to reduce our spending on gold and save money in the event of a hard blow," said the 29-year-old.

- Pledge your gold -

According to the World Gold Council, consumption in India plunged 56% year-on-year in the first half of 2020. Demand for the April-June quarter even slipped 70% to 63.7 tonnes, a plus low since the 2008 financial crisis.

In addition to jewelry, many Indians keep gold bars and coins as a safe haven against inflation. Many of them are now pledging them for loans and better interest rates.

A farmer in the southern state of Karnataka, Bhadresh Gowda used his wife's wedding jewelry to obtain a loan of 200,000 rupees (2,260 euros) to compensate for the significant losses suffered during the confinement.

"Initially, I was hesitant to use gold as a guarantee because these jewels are a legacy of my family but times are hard," he told AFP.

Unlike traditional loans, gold backed credit "is very easy to obtain and requires less paperwork," he explains, making the process much faster.

"Gold is performing better now. Once the economy improves, I'll pay off the loan and get my gold back," said the 39-year-old farmer.

Gold will eventually make a comeback in India as consumers will regain their appetite for this metal, believes Somasundaram PR, India director of the World Gold Council, however.

“People who have saved money because of vacations or canceled expenses will invest in gold,” he predicts.

The pandemic is still raging in India, however, and shows no signs of improving anytime soon. Under these conditions, potential consumers like Chiranjeevi Ahire prefer to be patient.

"It seems to me better to keep my money for the moment", judges the future groom. "I'm not going to risk my financial stability for gold. It sounds like a really bad idea."

© 2020 AFP