In yesterday’s trading in the global markets, an ounce of gold was worth $1,170. While a number of analysts believe the surge in gold will gradually wane in the coming days, many still believe it will continue for some time to come. The current levels have also led to comments that the state has to introduce a strategy to convince individuals to turn the large amounts of gold in their possession into cash. These assets are called “under-the-pillow savings” in Turkish investment literature to refer to any kind of valuable asset that is withheld from the registered investment environment such banks or the stock exchange.
The president of the İstanbul Gold Refinery (İAR), Özcan Halaç, estimates there are nearly 5,000 tons of gold in under-the-pillow savings, which corresponds to a fortune of $180 billion at current market prices. “Such savings that are kept under the pillow is money ‘smuggled’ from the economy,” he said, adding that this hidden treasury would create jobs for millions and an extra dynamism to the economy if not kept away.
Speaking to the Anatolia news agency, Halaç said soaring gold prices are making Turks richer but causing damage to the Turkish gold and jewelry market. People usually tend to purchase gold as jewelry or as an investment tool, he noted and underlined that the gold trade has recently been for investment concerns. The price of a quarter gold coin, which is usually chosen as a gift and which has 1.6 grams of pure gold in it, has reached TL 100, and therefore, demand has shifted to small 1 gram gold bars, which are generally chosen for investment purposes, Halaç noted.
For Halaç, the major reasons behind the soaring gold prices are the global economic crisis, the dollar’s rapid depreciation, falling interest rates, declining production and consumption of gold, and investors’ search for alternative and more attractive investment opportunities. Alaattin Kameroğlu, the president of İstanbul Chamber of Jewelers (İKO), said it was quite hard to predict precisely where gold prices are heading. “Gold prices are moving one step back and two steps forward,” he commented. The upswing in prices has not stemmed from an improvement in the jewelry business but from the investors’ increased appetite for gold and the central bank’s decisions to increase gold reserves in the search for a safe haven amidst the crisis.
Buying gold in the form accessories is significant for the jewelry sector, Kameroğlu said, arguing that the increase in gold prices will damage the business. “We really wish gold prices would start falling again and that people would start buying jewelry,” he added. Jewelers are only working at around 10 to 20 percent of capacity, he said, underlining that this sluggish performance is not sustainable.
İstanbul Gold Bourse (İAB) President Osman Saraç, too, mentions the waning dollar and the ambiguities in the global financial markets as major drivers pushing up gold prices. Given that adverse conditions in the global markets are difficult to correct, he believes gold prices will keep increasing in the coming year, too.
Saraç argued that the global crisis has caused “a structural change in investor behavior” in favor of gold, which is commonly regarded as a safe haven in times of war and economic meltdown. The dollar, floating at its lowest level for the last 15 months is also contributing to the surge in gold prices, he asserted. “Besides, investors are estimating that the fear of inflation will evaporate in the long run as a result of the recent quantitative expansion in monetary policies worldwide, and this is causing a boost in the demand for gold, which is widely perceived as a hedge against inflation,” Kameroğlu added. Gold prices, which have gained over 30 percent since the beginning of the year, are also supported by the expectation that US interest rates will continue to stay at low levels for a long time ahead, he said.
In light of these assessments, Saraç said he believed gold prices will keep increasing next year to new record heights, citing a recent estimate by the London Bullion Market Association that prices will shortly reach $1,200 per ounce. He also claimed that booming commodity prices are also having a positive affect on global prices.
Mehmet Ali Yıldırımtürk, an expert in the gold and money markets, points out that people usually tend to consider their investment decisions in the winter months and that this behavior is a part of seasonal factors explaining the recent rise in gold prices. He said the demand for gold usually climbs in the summer seasons in countries such as Turkey, India and Egypt due to wedding ceremonies, in which relatives mostly present gold and jewelry as wedding gifts. “However, since the fasting month of Ramadan coincided with summer this year, people delayed wedding ceremonies until October and November, and this played a role in the rise of the demand for gold in these countries,” he argued.
Benzer Haberler 
National
