Gold rush now eased, fall in price still likely
ISTANBUL- Hürriyet Daily News
A jewelry store owner says ‘money is reduced to ash in fire, but gold melts and can be sold anyway’ according to Turkish people. DAILY NEWS photos, Hasan ALTINIŞIKA sudden fall in gold prices two weeks ago caused a gold rush among Turks, who were unable to find gold coins in the market in the days after the drop. While jewelry stores in the Grand Bazaar, the unofficial center of the Turkish gold market, say this gold rush is a “typical Turkish attitude,” experts say a similar situation is also seen in the other “gold-loving” countries, like India, where gold prices have also fallen.
The intense demand again resulted in the raising of gold prices, which removed the situation “considered as profitable,” but sector professionals and analysts claim the prices will still continue to fall.
The gold price per gram approximately dropped from 92 Turkish Liras to 79.5 liras on April 15, a 13-14 percent decrease that created an opportunity to people who immediately rushed to buy quarter and half gold coins. This gold rush caused a reduction in the gold supply within a few days, as the gold introduced to the market by the Mint, the unique official authority that produces gold once a week, was unable to be adjusted according to this unpredictable demand. With demand showing a serious increase and supply remaining unsatisfied, the gold selling price reached around 150 liras, despite its purchasing price being at around 130 liras. The wage rate variance, between the selling and purchasing prices thus increased to 20 liras (it is normally between 3 and 5 liras). The quarter gold coin reached the old price before the sharp fall, and demand started to drop when people realized that the advantageous situation did not exist anymore and the Mint released more gold to the market. Gold prices then became more balanced last week.
Turks’ interest in gold: normal attitude?
Gold is particularly attractive for Turks, seen as a convenient instrument for saving and a real object to show wealth. The jewelry stores in the Grand Bazaar in Istanbul, a touristic bazaar containing many jewelries and souvenir shops, agree that Turkish people love gold and purchase it as a saving and investment. Customs also play a role in gold purchasing, said Tülin Sarraf, a jewelry owner, noting that women like using gold as an accessory and that people give it as a gift at weddings.
Another jewelry owner, Metin Kocatepe, said that when people tried to benefit from low gold prices they also caused “unconscious shopping,” as their demand raised the selling price to 150 liras and they bought gold coins from almost unchanged old prices. However, Kocatepe noted that people had a strong notion that, “Money is reduced to ash in fire, but gold melts and can be sold anyway.”
While some in the Grand Bazaar claimed that the gold rush was a “typical Turkish attitude,” an expert said a similar situation was also seen in “gold-loving countries” such as India, China and Dubai. “A large number of people bought gold in small amounts, which was seen as gold rush,” he said, adding that people preferred to buy quarter gold coin, which is more convenient for their budget.
Prices to fall again
Low gold prices are good for the jewelries, said Hikmet Koçak, chairman of Koçak Gold, but he stressed that stability in prices was even better. Koçak stated that he expected prices would continue to fall, even if they experienced the rise last week. “I think gold prices will fall, but I might be wrong because there was no economic-basis explanation when it plummeted sharply two weeks ago. Some said it depended on the psychological attitudes of investors,” he said.
The expert said gold prices would be more balanced this week, as the Mint would introduce more gold to the market. However, he also said gold prices would decrease, particularly in the summer season, and he did not expect such volatility in demand to be repeated. Jewelry stores in the Grand Bazaar also said they mostly anticipated a fall in prices.