By Rawa Abdulla
ERBIL, Kurdistan Region — At least four gold retailers in Erbil have declared bankruptcy and more are in line to close their shops in the Kurdistan region following last week’s decline of gold prices on international markets.
Global gold prices fell to their lowest level in more than five years earlier this month largely in reaction to speculation about the US Federal Reserve’s rate rise.
A Kurdish gold retailer leader warned Monday the declining prices could in the short run destabilize the market further and force many gold shops to file for bankruptcy.
“It is not just the falling prices on the world markets, but also the ongoing financial crisis that has had a far stronger impact on Kurdish retailers,” Qaraman Jawhar told Rudaw referring to the budget dispute between the Kurdistan Regional Government and the Iraqi central government since early 2014.
The global gold price last week was more than 40 percent below its August 2011 peak, falling below $1,100 an ounce for the first time in five years.
In the Kurdistan region the dramatic trend has been roughly the same and also impacted total imports of the metal to the region. An ounce of 21 carat gold rose to 2,275,000 Iraqi dinars ($1,890) in 2013 at its peak, but fell to 1,330,000 Iraqi dinars ($1,106) last week, sending shockwaves in business circles in the region.
“People don’t buy gold like they used to before the economic crises,” said Shwan Muhammad, a spokesperson for the Kurdistan Gold Union. “The ISIS war and the delay in budget payments have had destructive impacts on people’s attitudes towards the economy as a whole.”
The falling demand has also been felt at the import level. In 2013 more than 115,000 tons of gold were imported to the Kurdistan region, mostly from Dubai and Turkey, but that has steadily fallen to less than 78 tons in 2014. During the first six months of this year just over 25 tons of gold were imported to the region, according to available data provided by the Gold Union.
Muhammad said the bulk of the accessible gold in the shops in the Kurdistan region has been purchased on credit in Dubai since most shop owners have in the past year been unable to sell their gold for cash.
“People’s purchasing power has weakened due to delay in payments and salaries which is why retailers have reluctantly agreed to sell to private customers on credit,” said Muhammad.
Qadir Muhammad Amin, who has run a local gold shop in Erbil’s iconic Qaisari bazar, said he has had difficulties in collecting the payments that private customers owe him for the purchased gold on credit. Amin, who has run his shop for the past 22 years, described the current conditions as “unprecedented and difficult.”
“People owe me some $800,000 for gold they have bought on credit,” said Amin. “I have never had to knock on doors to collect the payments in my life like I do now.”
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