By Syed M. Aslam
From time immemorial, gold has been respected as the best used precious metal not only due to its usage in ornaments but also as a widespread means of investment 'a saving for a rainy day'. No wedding ceremony in Pakistan is complete without gold jewellery which traditionally has become the most expensive item on the dowry list for parents of brides and also for the prospective grooms.
In Pakistan, like many other countries in the region, gold jewellery is more than a thing of beauty, a joy for everyone, particularly the women folks. It is the most credible mean of investment, which offers better returns than fixed deposits. The popular opinion is not unjustified as there has been a tremendous increase in the price of gold over the years.
Pakistan produces one the finest gold jewellery, particularly plain and generally studded, and its hand made designs are second to none in the world. It is also gifted with vast deposits of world class precious and semi-precious stones including rubies from Hunza Valley, pink emerald of Swat, and peridotes from Kohistan.
The gold trade in Pakistan is entirely dependent on imported gold the primary source of which is Dubai. The previous government granted licence to a single importer, 'ARY', for import of gold into the country. The present government has granted licences to two more importers making three companies responsible for all the gold imports into the country. The import of gold is subjected to duty of $ 1 per tola (11.54 grams), which translates into about Rs 4 per gram at current exchange rates.
Attempts to revive Saindak mine in District Chagai in the province of Balochistan, the first large scale metal mining project in Pakistan, has remained fruitless due to heavy capital investment. Repeated attempts to revive the Saindak Copper Gold Project to produce 15,810 tonnes of blister copper annually with gold containment of 1.47 tonnes, were futile due to an extremely uneconomical gold recovery cost. According to Mahmood Choksy, a gold jewellery exporter and also chairman of All Pakistan Gem Merchants and Jewellers Association, the cost to recover gold at Saindak is a staggering $ 400 per ounce, way above the international price of $ 284 per ounce.
According to World Gold Council (WGC), the marketing arm of world gold miners, gold demand in the country increased from 81.8 tonnes in 1997 98.2 tonnes in 1998 depicting a 20 per cent increase. India, the largest consumer of gold in the world, set a new record for the fourth consecutive year in 1997 as total gold demand increased by 11 per cent from 736 tonnes in 1997 to 815 tonnes in 1998.
WGC which started monitoring the gold demand in Pakistan for the first time in 1998, attributed the increased gold demand in Pakistan on the high affinity for gold in rural Pakistan, combined with slump in international prices in the same year, particularly in the third quarter when it touched as low as $ 288 per ounce.
In spite of economic sanctions, imposed on Pakistan after its option to go nuclear, the gold demand in the country remained unaffected in the country, primarily due to traditional belief that this is feasible to investment in gold.
Pakistan is entirely dependent on imported gold for jewellery manufacture and all other purposes. According to Mahmood Choksy, the bulk of gold import— about 40 per cent— is used in jewellery manufacturing while a similar quantity is being smuggled out of the country, mainly to India. The remaining 20 per cent, he added, is held for investment purposes in the form of biscuits. Industrial usage such as liquid gold in the manufacture of crockery and circuit board is negligible. However, jewellers have their own statistics about various statistics in the gold trade including its usage, ratio of new gold as compared to old, and local sales.
Muhammad Saleem, a local jeweller, said that 70 per cent of all gold imported is used by the jewellers, 5 per cent is used by the industry while the rest of the 25 per cent finds its way out of the country illegally.
Similarly, sources in the gold trade do not agree with the ratio between the use of new and old gold. Choksy says it is 40:60, the General Secretary of Hydri Sarrafa and Jewellery Group, Abdul Wahab put the ratio at 65:35 (65 per cent new, 35 per cent old) while another jeweller put the ratio at 70-80 per cent.
Saleem said that the ratio of usage of old and new gold by jewellers depends on the area where an individual shop is located— shops centred around posh areas such as Zaib-un-Nisa Street use comparatively lesser quantity of old Gold as compared to those located in lesser expensive markets. He put the ratio in the Saddar area at 40:60 (40 per cent old, 60 per cent new).
They also disagree with the trends of sales of gold jewellery during the last many years. Choksy said that sales of gold, particularly jewellery, has increased over the years due to an increase in population. His views were shared by Saleem who agreed that sales are ‘OK’ in spite of a substantial increase in the price of gold. Abdul Wahab, however, said that substantial increase in the cost of living and the subsequent decline in purchasing power have affected the sales. However, the ratio of visits by the buyers to the jewellers' shops has not declined but buyers prefer purchasing lighter jewellery.
