Gold trade struggles, diamonds still shine
Güncelleme Tarihi:
by Reeta Paakkinen
Oluşturulma Tarihi: Ocak 09, 2009 00:00
ISTANBUL - The ongoing global crisis has dealt a blow to the gold and jewelery trade in Istanbul’s Grand Bazaar, that has witnessed many crises in its 548 years of existence. While gold dealers struggle to keep business going, jewellery shops remain optimistic.
The ongoing fluctuation in financial markets is hardly a new experience to shopkeepers of Istanbul’s Grand Bazaar, the Ottoman shopping complex that has witnessed numerous other economic slowdowns and crises during its 548-year life.
For the past three months, the global finance crisis has troubled particularly the Grand Bazaar’s gold dealers, whose business has evolved from selling gold to buying it back from worried consumers.
Şeref Yurdaer, who has dealt gold at Grand Bazaar since 1975, said over the past three months, most of his business has consisted of buying back gold coins from consumers. At present, a gold coin costs 275.32 Turkish lira, and gold traders buy them back at 270 lira.
"We used to sell more gold coins than we bought back, but for the past three months the situation has turned around: for every three gold coins we sell, we buy back some 30 or 40," Yurdaer told the Hürriyet Daily News & Economic Review on Wednesday.
Behavior change
Change in consumer behavior caused by the ongoing crisis is leading many shop owners to operate at a loss, said Murat Muratoğlu of Murat Jewellery. "Consumers, who these days have less cash, are prioritizing loan payments and rent, and selling their jewellery," Muratoğlu said. "Our business volume is down by approximately 65 percent," he said. "Before, gold coins sold back to us by customers amounted to 20 percent of total business, today it is some 70 percent. Profits are very low at present."
Shopkeepers focusing on precious stones, however, seem more optimistic about the future and point out that 2008 on the whole was a profitable year. "The crisis has not yet been reflected in our business. Some 60 to 70 percent of our customers are foreign tourists visiting Istanbul and the high season only ended in November. In fact, we are very pleased with our results for last year," said Adem Kurtulmuş, owner of Edel Jewels.
However, in order to protect itself from the spreading impacts of the crisis, Kurtulmuş has decided to find new, alternative markets. "We are looking at Arab countries for future business and will also focus on increasing our sales volume in markets we are already in; the United States, Europe, Hong Kong and China," Kurtulmuş said.
"So far we have not really been affected by the crisis Ñ only one of our customers sold her jewellery back, because her spouse’s business was having financial difficulties," he added.
Euro-dollar parity
A stronger euro is expected to strengthen profits in the Turkish jewellery industry in 2009. "Euro-dollar parity, which used to be at 1.6 is now approximately 1.36. This situation is beneficial as we buy in dollars," Kurtulmuş said.
Fuat Kırgız, of Kafkas Jewellery, however, said the crisis had reduced profit margins in the jewellery industry. "But in our case, business for A+ customers that make up the majority of our clientele, goes on as usual,' he said.
Kırgız noted modern communication means have contributed to a rapid spread of wariness among consumers. "News about the crisis is spreading fast through modern means of communication, the Internet and mobile phones. This makes consumers wary of spending money. Psychology is playing a major role in this crisis," he said.
"There is definitely a need to keep calm and avoid overly bleak scenarios. If we handle our business with care we will be able to deal with this crisis. After all, gold or diamonds will never lose their value," Kurtulmuş said.
For the past three months, the global finance crisis has troubled particularly the Grand Bazaar’s gold dealers, whose business has evolved from selling gold to buying it back from worried consumers.
Şeref Yurdaer, who has dealt gold at Grand Bazaar since 1975, said over the past three months, most of his business has consisted of buying back gold coins from consumers. At present, a gold coin costs 275.32 Turkish lira, and gold traders buy them back at 270 lira.
"We used to sell more gold coins than we bought back, but for the past three months the situation has turned around: for every three gold coins we sell, we buy back some 30 or 40," Yurdaer told the Hürriyet Daily News & Economic Review on Wednesday.
Behavior change
Change in consumer behavior caused by the ongoing crisis is leading many shop owners to operate at a loss, said Murat Muratoğlu of Murat Jewellery. "Consumers, who these days have less cash, are prioritizing loan payments and rent, and selling their jewellery," Muratoğlu said. "Our business volume is down by approximately 65 percent," he said. "Before, gold coins sold back to us by customers amounted to 20 percent of total business, today it is some 70 percent. Profits are very low at present."
Shopkeepers focusing on precious stones, however, seem more optimistic about the future and point out that 2008 on the whole was a profitable year. "The crisis has not yet been reflected in our business. Some 60 to 70 percent of our customers are foreign tourists visiting Istanbul and the high season only ended in November. In fact, we are very pleased with our results for last year," said Adem Kurtulmuş, owner of Edel Jewels.
However, in order to protect itself from the spreading impacts of the crisis, Kurtulmuş has decided to find new, alternative markets. "We are looking at Arab countries for future business and will also focus on increasing our sales volume in markets we are already in; the United States, Europe, Hong Kong and China," Kurtulmuş said.
"So far we have not really been affected by the crisis Ñ only one of our customers sold her jewellery back, because her spouse’s business was having financial difficulties," he added.
Euro-dollar parity
A stronger euro is expected to strengthen profits in the Turkish jewellery industry in 2009. "Euro-dollar parity, which used to be at 1.6 is now approximately 1.36. This situation is beneficial as we buy in dollars," Kurtulmuş said.
Fuat Kırgız, of Kafkas Jewellery, however, said the crisis had reduced profit margins in the jewellery industry. "But in our case, business for A+ customers that make up the majority of our clientele, goes on as usual,' he said.
Kırgız noted modern communication means have contributed to a rapid spread of wariness among consumers. "News about the crisis is spreading fast through modern means of communication, the Internet and mobile phones. This makes consumers wary of spending money. Psychology is playing a major role in this crisis," he said.
"There is definitely a need to keep calm and avoid overly bleak scenarios. If we handle our business with care we will be able to deal with this crisis. After all, gold or diamonds will never lose their value," Kurtulmuş said.