Gold jewelry exports surge as crisis continues

JAKARTA (JP): Indonesia's exports of gold jewelry have recorded a significant increase during the country's 18-month economic crisis as many traders have shifted their markets overseas due to low demand at home, according to the World Gold Council (WGC).

WGC Country Manager Indonesia Leo Hadi Loe said on Thursday that many people have even sold their gold jewelry to benefit from the sharp increase in the price of gold from the impact of the collapse of the rupiah against the U.S. dollar.

Leo said that in 1996 total domestic demand for gold jewelry reached 130 tons, while exports stood at zero. In 1997 domestic demand dropped by 30 percent to 92 tons while exports increased to 25 tons.

"In 1998 domestic demand reached only around 40 tons while exports increased to 30 tons," he said during a breaking of the fast gathering.

Leo said that Dubai and other Middle East countries were the biggest importers of Indonesian gold jewelry, followed by Hong Kong, Singapore and the United States.

He said that exports of gold jewelry would continue to rise this year as many traders had gained access to international markets. But he said the increase would not as high as in 1997 and early last year due to the relatively stronger rupiah.

The rupiah, which plunged to its low of 17,000 against the U.S. dollar in January as compared to 2,500 in July, has been relatively stable in the past few months. The currency significantly gained to fall in a range between 7,500 and 8,000 for several months until the spillover of the Brazilian devaluation hit it early this week. The rupiah passed through the 9,000 level on Friday as worries over the Brazilian spillover continued.

The price of gold in the domestic market rose to 140,000 per gram in July 1998, compared to its pre-crisis level of Rp 28,000 in June 1999 due to the rupiah's collapse.

Leo said that the domestic demand for gold jewelry might also start to recover this year in line with the improvement in the country's economic fundamentals.

"We predict that Indonesia's exports of gold jewelry will increase between 10 percent and 20 percent in 1999. Domestic demand is also predicted to increase by 10 percent this year."

He said demand for gold jewelry during the economic crisis came from cities in Sulawesi, Kalimantan and Sumatra, instead of big cities in Java, because those regions have not been hit so hard by the crisis.

"Demand grew in provinces where there are cocoa, rubber and coffee plantations, and forest areas as people there enjoyed a windfall profit from the rupiah's sharp depreciation against the U.S dollar," he said.

Leo said that WGC's recent survey in four crisis-racked Asian countries, Indonesia, Thailand, South Korea and Malaysia shows that people still considered gold a good investment during the crisis.

He said that demand for gold in the crisis-racked Asian economies is predicted to revive this year as it played an important role during the economic crisis for people in those countries.

"If their economies are starting to mend again and given the propensity of demand for gold in these countries -- and it was proved that they could use it last year -- I expect demand to grow again," he said.

WGC Indonesia's promotions manager Marcia Moniaga said when the Asian crisis struck last year those who owned gold were fortunate. Koreans, Thais, Indonesians and Malaysians sold gold, finding it to be an asset when currencies were collapsing.

The crisis has forced many Indonesians and Thais to sell their gold jewelry in order to survive, while many Malaysians have still kept theirs, since the crisis did not hit its economy as hard as it did Indonesia's, she said, adding that many Koreans donated their gold to the government to help it salvage their economy. (gis)