"Overall sentiment is weak, the import policy is not favourable, which has resulted in high premiums. Most consumers are looking to exchange old for new," said Haresh Soni, chairman of All India Gems and Jewellery Federation, which groups more than 300,000 jewellers.
The Indian government will welcome the increased recycling of gold as it tries to rein in the current account deficit to an acceptable range of 3.6 percent to 3.8 percent of GDP, from 4.9 percent in the June quarter, and is unlikely reverse its recent measures any time soon.
"I think (gold) strictures will be there for at least the next six to twelve months," said Naina Lal Kidwai, president of the Federation of Indian Chambers of Commerce and Industry.
($1 = 62.4000 Indian rupees)