Jewellers in Bangladesh are bracing for a slump in sales as gold prices rose to a new high on the international market.
Gold powered to a record high of $1,300 an ounce on the international market yesterday, with investors pouring more cash into the market, unnerved by global economic health worries.
In Bangladesh, the price of 22-carat gold per bhori (11.66 grams), which is most popular among users, rose to Tk 38,958 yesterday from Tk 38,000 last week.
But local sales of diamond jewellery doubled in the last two years, due to an increase in gold jewellery prices, said industry insiders.
The price of 22-carat gold was Tk 10,614 per bhori in 2003. Buyers prefer 22-carat gold for its purity, as it is 96 percent pure gold. The price of 21-carat gold currently stands at Tk 37,208 per bhori on the local market.
Industry insiders said the sales of gold jewellery slumped more than 50 percent in the last three years, as demand for ornaments declined in line with soaring prices of the precious metal.
"The recent rise of gold prices in the international market will increase prices on the local market as well. And this will reduce consumption, which is alarming for the local ornament makers," said Anwar Hossain, president of Bangladesh Jewellery Manufacturers and Exporters Association.
“Except for weddings, a majority of the people are no longer buying gold ornaments. Jewellers were forced to increase the price of their products to adjust with international prices," said Hossain, adding that people are now spending the least on jewellery.
The annual demand for gold jewellery declined to 10-12 tonnes in 2010 from 45-50 tonnes in 2004, according to the association's data. The annual market for gold jewellery is worth around Tk 3,500 crore.
Recycled gold jewellery is the main source for the bullion traders to make new jewellery. The manufacturers also buy gold from migrant workers and other travellers, who are allowed to bring in 200 grams of gold on every visit to Bangladesh.
Local goldsmiths buy gold from travellers and migrant workers, mainly from the Middle East.
While they are struggling to survive amid declining demand for gold items, demand for alternatives, such as diamond and gold-plated jewellery, is growing.
Industry insiders said the sale of diamond jewellery increased manifold in the last few years in Bangladesh.
"The demand for diamond jewellery is rising very fast because prices are more tolerable than gold ornaments," said MA Wadud Khan, president of Bangladesh Jewellers' Samity.
The value of sales doubled to more than about Tk 200 crore in 2009 than last year.
In addition, many people are buying gold-plated ornaments these days. Gold plating is a method of depositing a thin layer of gold onto the surface of another metal, mostly silver.
Even though the sale of gold jewellery is dwindling, it will not be cut completely, said jewellers. The demand for gold has not faded in the local market as this precious yellow metal is used in different industrial sector.
Gold is used as a good conductor in many electronic items, such as mobile phones and computer keyboards, said Hossain.
"So the demand and sale of gold would not reduce completely."