Saraç: Increase of gold prices affects jewelry consumption negatively

Saraç: Increase of gold prices affects jewelry consumption negatively

September 27, 2010, Monday/ 17:07:00
İstanbul Gold Exchange (İAB) Vice President Osman Saraç said the record levels of gold prices have decreased jewelry consumption in Turkey, which could indicate that gold is being used as a savings instrument.

“With these record levels for gold and the ongoing recession, demand for jewelry has decreased both in Turkey and other countries. At the same time, a strong lira against the dollar has caused a rise in gold prices in lira, which has led to a limited supply of scrap gold this year. With these high levels of gold prices, it is evident that the sector has been hit hard and that gold is currently used mainly as a savings instrument” Saraç said. Saraç noted that the price of gold was around $1,100 per ounce at the beginning of 2010 and hit its lowest level on Feb. 5, when it hit $1,058 per ounce. Due to concerns about the global economy, demand for gold increased consistently and reached the new record of $1,296.10 per ounce on Sept. 22.

Saraç pointed out that the increased demand mainly arises from the high demand of central banks for gold and the SPDR Gold Trust’s assets, the world’s largest investment fund based on gold, reached 1,300 tons in September of this year.

As of Sept. 23 the export of İAB members was limited to 29 tons of gold while the amount of gold and silver processed was 81.9 and 284.4 tons, respectively. “Gold is seen as insurance in the markets. Since the Fed’s assertiveness keeps interest rates at a low level, investors are attaching the utmost importance to gold as an alternative investment. After the meeting, the Fed determined to go on with the current monetary policy that is leading to a weak dollar. Investors therefore continue to purchase gold as a hedge, a finance term that refers to an instrument an investor uses to take the opposite position in order to offset exposure against price fluctuations. It is expected that the rise in gold prices will continue because September and October are usually the seasonal time for strong demand,” Saraç said.

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