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.