Gold price rises in Syria despite global decline, justifications are “illogical”: experts

A shop selling gold in the goldsmiths market in Damascus - 10 May 2022 (Enab Baladi/Hassan Hassan)

A shop selling gold in the goldsmiths market in Damascus - 10 May 2022 (Enab Baladi/Hassan Hassan)

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Enab Baladi – Jana al-Issa

After a stagnation witnessed since the beginning of this year, the gold markets in Damascus witnessed a clear demand during the summer season, with its prices locally reaching unprecedented levels.

Gold prices have witnessed several fluctuations in the local market in Syria since the start of the Russian invasion of Ukraine last February, affected by gold prices globally, as the value of gold pricing in the goldsmiths’ markets sometimes recorded prices higher than international prices.

Although the regime’s government does not recognize the black market for the exchange rate of the US dollar, it considers it the approved standard for calculating the price of gold locally, not on the basis of the official price determined by the state Central Bank.

Expatriates “revive” the market

The owner of a gold shop in the goldsmiths market in the famous Hamidiya neighborhood in central Damascus attributed the reasons for this turnout to the Syrians residing outside Syria and their heavy presence at this exact time.

The goldsmith, who required not to be named for security reasons, told Enab Baladi that most of his customers were non-residents in Syria who bought gold either to present it as a gift to their families residing in Damascus or to themselves.

The shop owner considered that the Syrians residing abroad wish to buy gold from the goldsmiths market in Damascus, either to guarantee the type and quality of the gold and its formulation “because they may be personally acquainted with the goldsmith” or to ensure that the piece is exchanged in case it is damaged if it is a “gift” for the residents inside the country.

The head of the Craft Association for Gold and Jewelry Crafting in Damascus, Ghassan Jazmati, said in August that the gold markets in the current and last summer season witnessed a “high demand” as a result of the visits of residents outside Syria on the one hand, and the large number of family events on the other hand.

As a result, Jazmati revealed that the purchase of jewelry this year increased by 85 percent, which made the purchase of gold savings less than in previous years.

According to the head of the gold association, the purchase of gold savings in 2014 and 2015 amounted to about 85 percent of the purchase amount.

Gold price based on black market

Gold prices have recorded frequent increases since the beginning of the year, linked to international prices on the one hand and the exchange rates of the dollar against the Syrian pound, but based on the black market price, not on the official exchange rate set by the Central Bank of Syria at 2512 SYP per dollar.

Dr. Firas Shaabo, an expert in financial and banking science, says it is realistic to rely on the black market for pricing gold in Syria, as it is the “real” price of the Syrian pound and the approved one that affects various sectors.

While the regime does not depend on the official price in several sectors, Shaabo considered that its existence is essentially “formal,” and the goal is not to feel “worried” about the economy when the Central Bank admits that the value of one dollar is equivalent to 4,500 Syrian pounds.

Since mid-August, the US dollar has been trading for 4,500 SYP on the black market, recording relative stability at this value after its value at the beginning of this year was about 3,600 pounds to the dollar.

“The Gold’s Dollar”

Business journalist and researcher Iyad Jaafari, in an opinion article published by al-Modon Online last March, talked about the emergence of the term “The Gold’s Dollar” and its adoption by some workers in the goldsmithing sector in Syria to describe the dollar rate, which is approved by the goldsmiths association.

Jaafari said that since the beginning of the process of the collapse of the exchange rate of the Syrian pound, the regime authorities began to pressure the goldsmiths association to set an official price for gold, which does not reflect the real exchange rate of the pound.

He added that the association was forced to issue an unrealistic price that caused, in later years (between 2013-2017), the goldsmiths market to go into chaos, as gold sellers depended on spot prices for gold according to the exchange rate.

However, since 2018, the association began stressing the need to adhere to the official pricing through almost daily warnings it sent to goldsmiths through its official identifiers, and at the same time, it provided them with a margin represented by what is known as the “goldsmithing” fee, according to Jaafari.

In the last two years, the association tried consolidating its control over the goldsmiths market by getting closer to the real exchange rate with its official pricing.

Thus, the price of the “gold’s dollar” that it relies on in calculating the official price has become closer to the black market price, and in some cases, it is equal to it, and in other cases, it has also exceeded it.

Despite global decline, gold price soars in Syria

During the past months, and amid fluctuations in gold selling prices globally, the drop in its prices globally was not accompanied by the prices set by the goldsmiths association, amid several government justifications.

On 24 August, coinciding with the depreciation of the Syrian pound’s exchange rates, Jazmati, head of the goldsmiths association, said that the rise in gold prices locally was caused by the “outbidding” game at the free market exchange rate.

According to Jazmati, the reasons for the rise in gold prices are due to a “deliberate decision” by the association that local prices are “close” to the prices of neighboring markets “to prevent smuggling,” despite the relatively stable exchange rate of the pound.

Shaabo, the economic expert, told Enab Baladi that the justifications for the high price of gold in Syria, despite its global decline, are “illogical.”

The price of gold is the same in the world, explaining the spread of an economically incorrect idea, and some people are always wrong about it, which is the existence of a low gold price in one country, and a high in another, he added.

The value of a gram of gold relative to the US dollar is the same worldwide, but some countries impose some fines or customs duties on the output of gold, which affects its price, Shaabo says.

The expert assured that gold will remain the safest means and the primary source of savings for countries, individuals, and companies to save money, whether in Syria or in any country that suffers from economic difficulties or security turbulences.

 

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