As COVID pushes millions into poverty, Indians sell gold to make ends meet: Report

When the COVID-19 pandemic struck India last year in March, many did not know how the virus was going to affect people’s lives and their life savings. The pandemic has left millions without jobs, pushing them either into bankruptcy or poverty.

Paul Fernandes, a 50-year-old waiter, had last year taken a loan using his loan to pay for his children’s education after he lost his job on a cruise liner. Paul, this year, is again selling gold jewellery to meet the expenses of his family after his attempts to start a home business and get another job went in vain, reports Bloomberg.

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“Selling my jewellery means I am not obligated to pay someone back along with an additional interest on that,” says Paul, who hails from Goa, quotes Bloomberg.

Now, Indians are turning into their last resort to make ends meet: Gold. The brutal second wave of COVID pushed millions on the brink of poverty in rural areas, where people are now relying on selling gold as it can be easily liquidated.

A consultant at Metals Focus, Chirag Sheth tells Bloomberg that the financial distress caused by the second COVID wave is likely to be much higher and it could lead to more outright sales of gold.  

If a new wave emerges, the supplies of gross scrap might exceed 215 tonnes, surging to the highest in nine years, Chirag Sheth told Bloomberg. He added that the move will also limit overseas inflows as India imports almost all its gold mainly from Switzerland. 

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“You already had a financial problem last year and you got out of that problem through gold loans. Now again, you are having financial problems this year with a potentially third wave on the way, which can again mean lockdowns and job losses,” Sheth tells Bloomberg, adding, “We can expect distress sales in a big way in August and September when the third wave could actually set in.”

Due to the lockdown-crippled economy, more than 200 million Indians have gone back to earning less than $5 a day, which is the minimum daily wage. 

India’s one of the biggest gold loan providers, Maanappuram Finance has auctioned Rs 4.04 billion of gold in three months from March from loans, which turned sour after dropping in prices of the metal. 

Indians have started to cut down on their gold purchases in the past couple of years due to the pandemic, as the World Gold Council said, the gold sales fell to the lowest in 2020 in more than two decades. 

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In the previous nine months period, the institution auctioned just 80 million rupees worth of gold. Bloomberg reported that Manappuram Finance sold gold jewellery as the borrowers, who are typically daily wage earners, small-time entrepreneurs and farmers, could not afford to repay the money.