ISTANBUL �Hürriyet Daily News
DAILY NEWS photo, Hasan ALTINIŞIK
Volatile and increasing gold prices in the past three months have radically eroded the popularity of gold as an investment vehicle among the public in Turkey, traders and professionals in the sector in Istanbul say.
The precious metal has gained in all major currencies this year, led by a 30 percent increase in the euro, on speculation that Europe’s debts will slow economic growth. UBS AG forecast in late May that gold prices would reach $1,300 an ounce within a month.
In Turkey, the sales price of a 22 carat ***** 720 gram Republic Coin, a popular means of savings in Turkey, increased from 359 Turkish Liras to approximately 413 liras between early January and the first week of June 2010.
Hüseyin Çelik, general manager at Troy Precious Metals Trade in Istanbul says increasing gold prices have led to a drop in gold consumption. Troy Precious Metals trades in treated, untreated, semi-treated, standard and non-standard precious metals.
“The price fluctuation means that buying gold coins is no longer perceived by the average Turkish consumer as a reliable investment. Whereas before, 100 Turkish Liras could buy half a republican coin, today with the same sum one only gets one-fourth of a coin. The price hike is directly affecting buying power,” Çelik said.
Changing market dynamics
Another impact of the fluctuating prices and decreasing consumer demand is a change in Turkey’s position in world gold trade. Gold imports to Turkey dwindled from 166 tons in 2008 to 37.6 tons in 2009, according to Istanbul Gold Exchange data. Over the first five months, Turkey imported only 1.17 tons of ***** and none in March or May. “Turkey used to be the third largest importer of gold in the world but in 2009 imports experienced a radical drop, when demand started going down, turning the country into an exporter by 2010,” Çelik said.
On a regular Thursday afternoon, the evolution of market dynamics and stagnation in gold sales was visible also on the corridors of Istanbul’s Grand Bazaar, the main venue in the city for its consumer gold trade. The bazaar, constructed in 1461, currently hosts nearly 4,000 shops of which approximately 1,500 are trading in gold. Many of the gold trading booths are either waiting for customers or about to close. Günay Güneş of Çarşı Kapı Kuyumculuk said people’s lack of trust in gold as an investment has forced many of the bazaar’s shops out of business. “Of the 750 shops on the main street of the bazaar – mainly trading gold and precious metals - some 40 have already closed and 20 more are in serious trouble,” Güneş said. “The ongoing fluctuation in gold prices is something people here are not used to. Because of the price hike, people don’t consider gold a trustworthy investment vehicle anymore. This setting is leaving us traders to run our business as if we were gambling,” he said.
Cost of attending a wedding up
Ümit Karaca of Beydağı Kuyumculuk at the Grand Bazaar agreed. “Because of the price hike gold has become a luxury for people, and no longer a means of saving. Even attending weddings where Turkish people usually give a gift of a gold coin to the bride and groom has become very costly. When one adds the republic gold coin [traditionally given as a gift to the married couple], the notes attached to the dress of the couple and travel expenses, attending a wedding can be very expensive,” Karaca explained.
In addition to gold sales experiencing serious stagnation, there has also been a clear drop in the amount of gold people are bringing to the Grand Bazaar traders to sell. “We are still buying gold from clients but the market is just not what it used to be. People sold much of their gold during the first stages of the crisis and therefore don’t have any more to sell. If prices go down, people will start buying and selling again, but in the current environment I do not see things changing much,” Karaca said.
Gold falls to $1,198.20 in London, lowest price since May 25
LONDON - Bloomberg
Gold declined for a third day in London as some investors sold the metal to lock in gains after a rally.
Gold is heading for a weekly loss of 1.3 percent, after climbing to a two-week high this week on increased investor demand for an alternative to the euro. The single European currency was steady against dollar today after sliding to the lowest level in four years on June 1. Holdings of bullion in the world’s biggest exchange-traded fund climbed to a record.
“Gold was pretty much on a one-way street, and it is only natural that we see a bit of a correction,” said Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva. “In the medium to long term, this may be an opportunity to buy into dips.”
Gold for immediate delivery lost as much as $9.65, or 0.8 percent, to $1,197 an ounce, the lowest price since May 25, and was at $1,199 at 11:35 a.m. local time. Bullion for August delivery was 0.8 percent lower at $1,200.50 on the Comex in New York.
“Gold feels jaded for now,” Edel Tully, an analyst at UBS AG in London, said today in a report. “There’s a general lack of conviction as investors appear to be struggling to make up their minds about risk appetite.”
“Gold at $1,300 an ounce could be a possibility this year if there’s no change to the economic situation,” Nabavi of MKS Finance said.