As the world’s leading economies struggled with the prospect of double-dip recession over the least year and a half, investor rush into the safe-haven shelter of gold once again came to prominence. And even as the American economy registers signs of slow stability, the sovereign debt crisis in Europe, exacerbated by credit agency downgrades, should provide enough international financial uncertainty to keep gold comfortably (uncomfortably for some) bid for at least the foreseeable future.
Interestingly, despite the Pakistani economy’s apparent decoupling with the international financial system, which kept the worst of the global recession spill-over from our shores, the correlation with gold is surprising. Whether or not the local market hike has been fueled by hedging for financial uncertainty or speculative frenzy that takes over whenever there is an irrational bull market remains to be seen. But the new trend has largely removed much of the middle class from the gold market – both buyers and sellers.
Market squeeze
Kamran Waheed is the face of Afzal jewelers, one of the market’s most respected names since as far back as anybody can remember. “The market has changed considerably in the last few years. It has matured,” he tells Profit.
“And while this means customers are increasingly inclined towards elegance and value addition as opposed to earlier standards of weight, glitter and glamour, it also means established names like ours must now cater to the market’s high-end segment, the mediocre chunk having been eliminated”. It is little surprise that constantly increasing commodity prices, in times of low employment and generally high inflation, have sliced the middle income segment from the demand spectrum. However, owing to traditional compulsions, their indulgencies are reduced to marriage-to-marriage buying.
New direction
Running the family business in changing times, Kamran says the way to survive and thrive for his like in the future is diversifying into the diamond industry, with plans to set up Pakistan’s premier diamond cutting facility.
“We already engage industry professionals from across the world, principally from Turkey, Italy, India, etc. Therefore, we have the proper reach, it’s just a matter of leveraging it to initiate production as opposed to import to sell,” he adds. Already, indigenous production levels have become cause for serious concern. Failing corrective action, imports will undercut local market price levels, disrupting long-held market dynamics.
This phenomenon can already be seen at play. “Singapore made chains flooding the local market are a signal of the trend to come,” according to Kamran.
Unnecessary hurdles
There are obvious rewards in catering to rising fashion demand of the rich and fashionable, but the cause is not helped by inefficient bureaucratic delays and chronic shortage, making industry expansion cost-benefit simply unfeasible. And this makes Kamran obviously animated. “We have enough productive potential to generate meaningful revenue, bolstering the government’s kitty in the process, yet there is little official patronage. This market segment, hit by official neglect and crippling energy crisis, will continue to struggle to accommodate changes in fashion sense and demand.”
Helping the industry
In a country where the precious metal and fashion industries have lagged regional contemporaries in many respects, Afzal jewelers offers lectures, trainings and internships to help shape the sell/supply side of the equation.
“Demand side maturity will have little effect if the industry is not ably equipped to cater to it,” says Kamran, emphasising the need for specialised institutions. Qualified professionals will not only ensure quality products and processes, they will also ensure the market grows as a whole, and becomes a more serious player in the international arena.
