Gold hunting an alternative during crisis

By Kafil Yamin

BANDUNG (JP): A wedding date has been set for Yadi, 37, and his fiancee, Yunyun. Yadi rushed to nearby jewelry stores to buy a pair of 24-karat gold rings. But he had difficulty finding them.

Only after days of exhaustive roaming around and explaining to a jewelry store owner that he was about to wed and was desperate to buy two gold wedding rings, did he find what he was looking for at a remarkably high price -- Rp 45,000 per gram.

That was late last year, when the economic crisis had already set in. Earlier last year gold sold for about Rp 23,000 a gram.

Months later, as the young married couple started looking for a house to live in, they sold their wedding rings. "We did it not because we wanted to, but because someone came to us and offered us a very good price for the rings. We were tempted. Besides, we needed cash for a down payment on a house," Yunyun, who was five months pregnant at the time, said.

The couple sold the gold rings for Rp 72,000 per gram.

Attracted by the high price, their mother-in-law, sisters and aunts followed suit in selling their jewelry. They put together necklaces, earring, bracelets. "It all becomes more or less 100 grams. Now we don't have any gold accessories," said Sarah, Yunyun's mother.

Sarah's family is not the only family to sell off their gold.

In their neighborhood, Cicalengka, on the eastern outskirts of Bandung, all the gold has disappeared.

From time to time, gold becomes scarce and display cases in jewelry stores are mostly void of gold accessories.

The gold is there, but because traders must comply with standardized prices, they choose to hold onto their merchandise to avoid losses caused by rising prices, which fluctuate in line with the currency turmoil.

"We are not allowed to sell our old stock at the latest price. And if we sell it, we will not be able to get new stock because prices have risen so much," a shop attendant at Kosambi business center said.

So the only thing they can do is stop selling their gold, and concentrate on buying secondhand jewelry.

Still, jewelry shop owners cannot just wait for sellers to come to them because "people think it's still safe to have precious possessions in their house until someone knocks on their door and offers a high price," said Au Tjung, a goldsmith.

So Tjung hires a number of people to go from door-to door-to buy gold.

Normally, he offers a three-day contract to a gold buyer. The contract value depends on how much gold the buyer is able to secure. "If someone says he can get one kilogram of 22-karat gold within three days, we can give him something like Rp 45 million."

But Tjung said the average value of contracts were between Rp 10 million and Rp 15 million "because normally, one person is only able to get 200 to 300 grams of gold in two or three days."

Tjung's fellow goldsmiths work the same way. A gold shop owner in Jamika, one of Bandung gold centers, said one jewelry store could hire 10 to 13 men. "There are at least 20 gold stores around here, you can count yourself how many people are on contract," she said.

A rough figure would be 2,500 jewelry stores in Bandung and its outskirts.

A buyer's story

Because gold is getting scarce, buying gold door-to-door is becoming an increasingly difficult job. Daud, a buyer on contract, has a story to tell:

"Once a friend of mine told me that somewhere in a far away village, people kept high-quality gold. Some even had gold nuggets. I rushed down to my financier and told him I could get a quarter kilogram of gold within two days. I got a Rp 15 million contract.

"I rented a car and crossed village by village, district by district, down to Gunung Halu, a very remote place at the foot of a mountain. It was twilight when I got there. How could I tell whether people had gold that they were willing to sell?

"I came by a small food stall, had some food and a cup of coffee. While chewing my food, I fished for clues: 'Anyone around here want to sell gold?' I asked the warung woman. 'Dunno, you want to buy some?' she replied. 'Yeah,' I sighed.

"After a pause, two old men came and ordered some tea. 'If you're interested in selling any gold, this gentleman will buy,' the women told the two men while pointing at me.

"The men said they did not have gold, but they could help me ask around whether people in the neighborhood would sell theirs. I went from house to house with the two men. Deals were made. At first, people, mostly women, seemed reluctant, but they soon excitedly sold me their gold after I told them how much I was offering.

"That day, I got 200 grams of gold comprising necklaces, rings, earrings and bracelets. I was astonished when several women offered gold nuggets! Where did they get them? I was informed later that they got them from Saudi Arabia. The women were former maids who worked in the Mideast.

"I couldn't buy the nuggets because I didn't have enough cash."

Later, other gold buyers traced Daud's tracks and three weeks after Daud arrived there, all gold accessories disappeared from the remote district. "There's no gold there anymore," said Maman, a gold buyer who traveled to the remote area last month.

On a good day, gold buyers only earn enough to make ends meet. "Commonly, we pick up a Rp 1,500 to Rp 2,000 profit margin per gram in buying and selling prices. If we can get 200 grams in our contract terms, we earn Rp 300,000 to Rp 400,000. In times of economic hardship like now, that's good money," gold buyer Maman said.

But working as a gold buyer on contract is only moonlighting. The buyers are originally clothes vendors in traditional markets, ojek (motorcycle taxi) drivers or carpenters who live near jewelry stores whose owners act as fund managers. So the financiers know them well and vice versa, a relationship on which deals are based. The gold buyers are armed with scales and testing stones.

Bad days

Days are not always bright for buyers, especially when gold becomes scarce. "The other day I had two days of hunting, combing six housing complexes and narrow village tracks. And all for nothing," Maman said, adding that he had to pay for his own car rental and gasoline.

In jewelry stores, gold accessories are melted down into nuggets. With documents that goldsmiths are authorized to issue, the nuggets are sold overseas. It is the present slide in the rupiah which gains them huge profits.

"International gold prices actually remain stable. But since our overseas buyers pay in dollars or other major currencies, we gain enough profit because we change the currencies into rupiah, with which we buy gold at home at lower prices," Tjung said.

When told that he was one of the few lucky ones to be blessed by the economic crises, he just said: "All we do is to try to survive in business. We offer a living to our brothers by giving them contracts to supply us with gold. Is there anything wrong with that?"

No, not at all.