Price slump sparks rush to gold

Price slump sparks rush to gold

ISTANBUL - Hürriyet
Price slump sparks rush to gold

Jewelers advice the customers to buy, bracelets or gold-by-grams instead of coins which are demanded more, if they want to draw advantage from falling price since the price of coins rise again due to high demand but low supply. AA photo

People are rushing to buy gold coins at bargain prices, aiming to benefit from gold prices plunging worldwide, while jewelers warn customers to choose plain gold to eliminate craftsmanship costs.

The hypermobility of gold prices queued people up to stock up as gold hit its lowest price in two years and people look to cash in on the slump.

“An ounce of gold had climbed up to $900 in 2011. Now it’s down to around $300,” Hasan Çavuşculu of the Ankara Chamber of Jewelers and Watch Sellers said. “Due to the fast drop, everybody is in a panic.”

Thanks to the price drop, shopkeepers from the Grand Bazaar, where a substantial number of jewelers in Istanbul are located, say the number of gold buyers has risen from 10 to 500 a day.

“We haven’t seen a fall like this in recent history,” said Ankara-based jeweler Adnan İlhan.

The spike in gold coin sales stems from small investors’ desire to have gold as a store of value in troubled economic times.

Particularly quarter and whole gold coins, also known as “cumhuriyet altını” (republic gold), are highly popular among Turkish people as they’re also traditional gifts that people give on many special occasions, like weddings and births. So, the price fall makes it a perfect time for people to buy some coins to save for later.

In addition to being the most desired ones, these coins require a lot more craftsmanship, which raises their market price and makes their production a slower process. Both components increase the coins’ market value.

The craftsmanship cost of a quarter gold coin has jumped to between 12 and 15 Turkish Liras from 3 liras, while cumhuriyet coins’ has surged to 35 liras from 10 liras.

Particularly, due to the skyrocketing demand for the gold coins, jewelers are struggling to supply enough coins. “We can’t procure these [coins] from the mints. We are selling them like hot cakes,” Çavuşculu said.

Coins go to black market

The increasing craftsmanship cost has caused a void swell in coin prices.

The jewelers are selling quarter and cumhuriyet coins around 5 to 7 percent above than their actual price, İlhan said.

As the mint fails to manufacture enough coins to supply the soaring demand, the coins, with a market price around 130 liras, have also begun to be sold on the black market for around 140 to 150 liras.

“Normally it takes two days for mint to process gold bullion and return it as a coin but due to high demand we don’t know when it will return,” Çavuşculu said. Jewelers suggest customers wait for normalization of the market and purchase gold products like bracelets or gram gold as their craftsmanship costs are lower, making them a better instrument for investment.

Çavuşculu added that jewelers had been accused of hiding gold during the price fall, but he said they would want to sell it if they had it.