India’s army of gold refiners face new competition

Following in the footsteps of his father and grandfather, he and his business collect scrap gold from jewellers, melt it down and sell it back to the jewellers in the form of gold bars.

He has two refineries, one in Kochi in the southern state of Kerala and the other in Tiruchirappalli in Tamil Nadu. Relatives have refineries elsewhere in the south of India.

“Every day my refiners on an average melt two to three kilograms of gold,” he says.

Almost every town in India will have at least one small refinery similar to those run by Mr Salunke. It is known as the “unorganised” refining sector, which distinguishes it from big refiners who make gold bars and coins from imported, unrefined gold.

It is estimated that, in total, Indian households hold a massive 25,000 tonnes of gold, and some of that is always available for sale, particularly when the price of gold is high or the economy is bad and people want to raise some cash.

Jewellers may process returned gold themselves but will often use small refiners who will make the gold back into bars.

Mr Salunke says local jewellers like to deal with small refiners like his, because they work quickly and are happy to accept cash.

“Most jewellers prefer buying gold from us, as we are based in every city with small units. A jeweller can take back his refined gold in a few hours, not like big refiners who will take days to refine the recycled gold.”

According to the World Gold Council, of the 900 tonnes of gold refined in India in 2023, 117 came from recycled sources.

But that recycling market is being eyed up by India’s big industrial gold refiners.

They have expanded in recent years, spurred on by favourable import duties on their main source of gold – imported, unrefined gold known as gold doré.

Between 2013 and 2021, India’s large-scale refiners increased their capacity from 300 to 1,800 tonnes of gold a year.

But it is difficult for them to import enough unrefined gold to keep their refineries running. In fact, less than 50% of their refining capacity is used, according to Harshad Ajmera, secretary of the Association of Gold Refiners and Mints.