A symbol of family pride

A symbol of family pride

By Christiani Tumelap, Contributor, The Jakarta Post

Gold jewelry saved Martha, 38, and her husband, Doni, 40,
during the peak of the country's economic crisis in early 1998
when both lost their jobs as a secretary and a banker.

Martha sold her gold jewelry to cover their household needs
and her hospital expenses for the delivery of her second child.

Martha, who likes to wear gold "for the sake of fashion and as
a personal statement", said she made enough cash as her jewelry
was valued very high due to the severe depreciation of the rupiah
to the U.S. dollar at the time.

"If not for selling my gold, I don't know how we could have
coped with the situation. I've sold all my jewelry, including my
favorite sets of gold necklaces, bracelets and earrings with
diamonds and rubies, which was a present from my parents. Now
that we both have new jobs, I'm trying to start buying gold
again, one piece at a time," she told The Jakarta Post.

During times of high inflation or when a country is facing a
severe political crisis, or worse, the possibility of war, many
people rush to the jewelers to buy necklaces, bracelets or rings
before the price surges. Or like Martha and many other people, to
sell their jewelry in hopes of making a profit from the price
difference.

People know that gold does not lose its value in such a
dramatic way that currency does, so they can resell gold and
still make a good return on their investment.

"The value of the rupiah declines in line with the increase of
the price of commodities. But the value of gold, even in rupiah,
never goes down. In fact, when the rupiah was weakening against
the dollar, the price of gold went even higher," Marcia Moniaga,
the promotion manager for the World Gold Council Indonesia, told
the Post.

She said keeping gold as an investment was wise because the
metal carries less risk compared to other investment
alternatives, like stocks and properties. It is also physically
resistant to fire or water.

Gold has also proven to be one of the few effective investment
instruments to beat inflation. The higher the inflation, the
better the price of gold will be. Gold's value, however, tends to
remain constant when the inflation rate is low and may decline a
little if the inflation stabilizes at a single digit.

For many people, high inflation or low gross domestic product
(GDP) means nothing when it comes to buying gold. When the
Indonesia's GDP was down by 0.72 percent in the fourth quarter
last year, gold sales instead increased by 19.2 percent to 31
tons in the fourth quarter from 26 tons in the third quarter.

"Indonesians have loved gold for a long time. They see it as a
status symbol and investment, too, that's why people like to give
gold jewelry to their children and grandchildren," Marcia said.

Dave Deepak, the first certified gemologist in Indonesia and a
long-time executive at the Indonesian Gold and Jewelry Traders
Association, said people should not buy gold jewelry just because
they wanted to turn a profit the next day or week when they
resell it.

"The main thing people should benefit from owning gold jewelry
is the satisfaction of wearing it," he told the Post.

Dave, who runs the Dee Chan jewelry store and manufacturer,
said for most people, the primary function of gold jewelry was
still as a status symbol. Although in the long run, gold jewelry
could yield an adequate profit for the owners, he added.

"It'll give you a good yield only in a long-term period, it's
a long-term investment. Owners can make a profit from the
exchange rate difference at the time they resell the pieces and
there is an increase in the appreciation value of gold," he said.

"If you really want to make a good investment in gold, you had
better buy gold bullion, which is the purest form of gold and
therefore has the highest value, instead of gold jewelry. Gold
coins are also a good option," Dave said.

Gold bars and coins bear the 999.9 mark, which describes the
purity of gold concentrate.

Gold coins are also popular, but mostly among collectors.
Apart from rare imported gold coins, such as the limited edition
Bhutan Millennium Dragon coins or John F. Kennedy Commemorative
coins, you can also buy the recently launched Soekarno series at
certain traders or the ONH gold coins, which come in weights of
one, five and 10 grams.

The fact that gold bars hold their value better than jewelry
is clearly reflected in the price difference, Dave said. The
price of a gold bar is about Rp 90,000 (about US$9.50) per gram,
while jewelry is about Rp 70,000 per gram.

People should be aware that when they buy jewelry, the price
they pay covers not only the value of gold or the gem, but also
other costs, such as workmanship, design and brand. However, when
they resell the jewelry to traders, the price no longer includes
the cost of workmanship.

As for gold bars, people get the exact market price whenever
they buy or sell because there are no other costs involved. And
any gold jewelry trader will take your gold bars or coins for
sure.

Dave said that despite the higher value of gold which is not
in the form of jewelry, not many stores sell gold bars or coins
because demand was so far mostly for gold jewelry. For this same
reason, Dee Chan focuses on selling gold jewelry set with gems.

He said in the past many people kept gold bars as personal
assets. But during World War I and II, people started to realize
that their gold bars were not easy to conceal as they fled their
villages seeking refuge from enemies. The only valuable thing
they could carry everywhere was jewelry.

Today, for practical reasons, many people prefer to buy
wearable gold jewelry. Dave suggests people buy gold jewelry that
contains only a higher concentrate of gold if they are thinking
of reselling it later.

The best form is 24 carat, which contains the highest
concentrate of gold at 99.9 percent. The second best is 22 carat,
which contains 91.6 percent.

Jewelry made from 24 carat gold is automatically the most
expensive. Less expensive gold, which is 18 carat, 14 carat and
10 carat, each has a purity concentrate of 75 percent, 58.3
percent and 41.6 percent respectively.

Is now the right time to buy gold jewelry? "For gold, the
answer will always be the same: yes. Buying gold bit by bit on a
regular basis is better and you can avoid getting stuck with high
prices," Marcia said.