T

he skyrocketing price of gold in the world market has caused a significant decrease in sales of gold jewelry ahead of the Idul Fitri celebration, a jewelry association said.

Gold prices were reported to have risen as high as US$1,829 per troy ounce, or around Rp 523,000 per gram, in international markets.

Indonesian Jewelry Manufactures Association chairman Leo Hadi Loe said that compared to sales of gold jewelry during Ramadhan last year, this year’s sales had decreased by 30 percent.

According to Leo, this was influenced by worsening economic conditions in the US and Europe. Due to the economic crisis, global markets were afraid to invest in stocks and bonds, both in US dollar and euro denominations, he said.

“Many have switched to gold as the demand for the commodity in the world market has increased, causing price fluctuation,” Leo said on the sidelines of the 16th Surabaya International Jewelry Fair over the weekend.

Leo said the current price of gold is $1,788 per troy ounce, which is approaching the international price of platinum. It was only $800 per troy ounce two years ago.

“According to my prediction, the price can reach up to $3,000 per troy ounce by the end of this year if international trade of this commodity is difficult to control,” Leo said.

In Indonesia, Leo said fluctuation in the price of gold had discouraged the middle-class from buying gold, but had encouraged the upper-class to buy gold bullion as an investment.

“For consumers, gold jewelry does not meet requirements as an investment instrument because of its decreasing value as the result of daily usage and design and production fees. That is why people are buying bullion,” he said.

PT Untung Bersama Sejahtera (UBS) marketing manager Catur R Limas said that high demand for gold bullion had encouraged jewelry producers to switch to other metals and raw materials, including silver and diamonds.

“In light of decreasing purchasing power, we have started to focus on silver jewelry,” said Catur, adding that such phenomenon had not only occurred in Indonesia, but also in other countries such as China, Korea and the Middle East.

This has promptly increased the price of silver by 200 percent. Silver, however, is still far cheaper than gold. A gram of silver is currently priced at Rp 25,000 to Rp 40,000. Last year it was around Rp 11,000 per gram, while in 2008-2009 it was only Rp 5,000 per gram.

East Java Governor Soekarwo said his administration would help boost gold jewelry production in the province, which has so far contributed some 40 percent of the national production annually worth about Rp 4 trillion of the total national figure of Rp 9.7 trillion.

“Apart from establishing more production centers and design training, events such as the Surabaya International Jewelry Fair expectably will also help increase sales of gold through the meetings of local traders with national and international buyers,” he said.

Some 200 gold businesses of various scale will participate in the fair, which will run until Monday at the Shangri-la Hotel, Surabaya.