Gold fast losing its glitter for some

Industry observers warn that as buyers are dwindling fast and sellers are starting to disappear, waiting for big gains from another record price surge, less than 10 per cent of the existing 6,000 gold shops could survive. And that would threaten more than 100,000 workers.

The owner of a traditional gold shop in Chon Buri, who asked not to be named, said last week that many traditional gold shops in Pattaya City and Banglamung district have had to shut down because sellers outnumber buyers.

"Some small gold shops have no cash to buy gold and their profit is not enough to cover expenses. They need to close shop," said the old man.

This was the most distressing period in his 30 years in business, he said, adding that he manages to keep going by renting out spaces above the gold shop.

Luxury gold products do not escape the calamity either, driven by overwhelming demand for gold amid the weakening US dollar and other commodities.

As the global gold price surges to an all-time high of US$1,123.40 (Bt37,300) per ounce, domestic prices follow suit, as nearly all gold consumed locally is imported. And fluctuations make it worse, as more buyers flock to gold bars to avoid the wider price volatility of gold ornaments.

Pisit Ong-art, the owner of Antique Goldsmith in Sukhothai, said the shop has fallen into the red since the gold price started to skyrocket early this year. He has witnessed a drop in orders and some customers also suspended their orders.

Luckily, his five to six goldsmiths, who have been told to wait at home until orders arrive, have alternative means to support themselves.

"We will call them when we get an order. Now, they go back to their hometowns to work on other jobs such as farming," he said.

Jitti Tangsithipakdi, president of the Gold Traders Association, said that due to lower sales, many gold traders have to export gold to reduce inventories and maintain cashflow. Such sales means little profits. They prefer that their customers return, as they have to shoulder other expenses, particularly payroll.

While shop clerks earn Bt6,000-Bt20,000 a month, major gold traders pay goldsmiths about Bt10,000-Bt40,000 depending on ornament designs, he said.

About 10,000 goldsmiths have been dismissed so far, he said. And the situation will get more serious, as the ratio of ornaments to gold bars will drop further from 5 per cent now.

"This is the first time in 100 years that Thailand's gold exports exceed imports. It's not a healthy sign, as it shows that Thais have become poorer and can't afford the commodity," he said.

Gold exports in the first nine months this year totalled 178 tonnes while only 82 tonnes were imported, according to the association. Last year, 130 tonnes were exported and 240 tonnes imported.

Nearly all gold is imported as bullion by major gold traders. The bullion is melted down and branded, then turned into gold bars and ornaments for distribution to gold shops nationwide. As the products must be bought outright, gold shops seek to resell the products to major gold traders to manage cashflow. Then, the traders, facing an oversupply, will have to export the gold.

Gold shops complain that this reflects the fact that more gold purchases are for short-term investment purposes. In the past, gold was held as a long-term asset or used as ornaments.

Several gold traders now pin their hopes on gains from the futures market, as that attracts more people. The Thailand Futures Exchange can become more appealing when a gold futures contract is valued at only Bt10 next year, instead of Bt50.

Jitti was disgruntled at this development, as the futures market is leading to the shrinking of the traditional gold shops with more buyers losing interest in physical gold.

"Traditional gold shops are like retail shops. They are now replaced by the modern trade channel," he said.