Kurdistan’s gold market plummets by 65 percent in three years
ERBIL, Kurdistan Region – Kurdistan Region’s gold market has weakened over the past three years of financial crisis with imports plummeting by 65 percent, according to an official from the Kurdistan Regional Government’s (KRG) Ministry of Planning. The drop in the market is being blamed on reduced sales to Iraqi customers and the loss of a middle class in the Kurdistan Region.
Mohammed Khalil, owner of Ziba Exhibition for buying and selling gold in Erbil, said, “Because of the financial crisis and reduced wages, nowadays two groups of people deal with gold: some people are obliged to sell the gold of their wives in order to cover their expenses or pay back their house mortgages or car loans, and wealthy people buy gold in kilos just like before. The middle class no longer exists.”
“Gold bars and lira are very marketable nowadays. There are some people doing business with gold. They buy gold bars or lira by the kilo when the price of gold falls and sell them when the price goes up, making good profit. In general, we can say that the business people who were previously investing in properties and cars have now turned to gold. Some people do not trust to keep their money in the banks. That is why they buy gold and sell it when the price goes up,” Khalil said.
According to official statistics, gold imports in the Kurdistan Region peaked in 2013 when more than $4 billion was spent importing 114 tonnes of gold from the United Arab Emirates and Turkey, making its way into the Kurdistan Region’s markets through Erbil and Sulaimani airports.
After 2013, gold imports decreased considerably, down to 77 tonnes in 2014, 56 in 2015, and 40 in 2016, an overall drop of nearly 65 percent.
“Due to the financial crisis, the halting of loans, and the ISIS war over the past three years, the gold business in the Kurdistan Region has become very weak. This has led to a reduction in gold imports,” said the ministry’s director of gold quality control, Bakir Aziz.
According to Aziz, before ISIS, much of the gold imported into the Kurdistan Region was in turn exported to Iraqi cities, predominantly Mosul and Baghdad. But after ISIS attacked, taking control over much of northern Iraq including Mosul, transit routes to transport the gold were cut off. This is why gold imports to the Kurdistan Region declined.
Aziz is, however, optimistic about the resurgence of the gold market, especially now that ISIS has been ejected from Mosul and other areas.
“The gold trade and imports are better this year. I therefore predict that the gold business will go back to how it was in 2013 over the next two years,” he said.
In the past, companies were mostly importing gold from the United Arab Emirates. Nowadays, Turkey has become the second (biggest) destination (to import gold from).
“Turkey facilitates much for traders of the Kurdistan Region and Iraq in order to compete with the United Arab Emirates. That is why nowadays 40 percent of the gold imported to the Kurdistan Region comes from Turkey,” Aziz said.
In the Kurdistan Region, there are some companies that import and export broken gold pieces, which they melt and then sell on to the Emirates and Turkey from where they import fashioned gold pieces.
Ardawan Najmadin, owner of the Qasr Imarat Company, imports gold and then sells it wholesale to more than 130 gold exhibitions in the Region.
“The continuity of the financial crisis has affected the sale of gold a lot. People are not as able as they were in the past to buy gold. Gold imports have therefore declined,” Najmadin said.
“Before the financial crisis, I sold nearly 300 kilos of gold to exhibitions every month. But nowadays I sell nearly 50 kilos of gold a month,” he detailed.
In the past, there was no tax on gold imports to the Kurdistan Region and owners of companies importing gold paid nearly 5 million Iraqi Dinars (IQD, about $4,300) a year to renew their company license. In 2014, a 10,000 IQD tax was imposed on every kilo of imported gold.
The general directorate of revenue tax issued new tax instructions in 2015. According to these instructions, companies should pay 5 percent of their profit for importing prepared gold and 3 percent for raw gold.
Government taxes are later added to the sale price, said Shwan Mohammed, deputy president of Erbil’s syndicate of goldsmiths.
There is hope the market will rebound, however. Nearly 100 gold exhibitions have increased in the province of Erbil alone over the past two years, despite the declining marketability of gold in the region.
“Goldsmiths are increasing day by day in the city of Erbil. Over the past two years, nearly 100 new exhibitions were opened in Erbil by the IDPs of Iraqi cities. There are currently nearly 500 goldsmiths in Erbil,” Shwan Mohammed, deputy president of Erbil goldsmiths syndicate, told Rudaw.
Mohammed Khalil, owner of Ziba Exhibition for buying and selling gold in Erbil, said, “Because of the financial crisis and reduced wages, nowadays two groups of people deal with gold: some people are obliged to sell the gold of their wives in order to cover their expenses or pay back their house mortgages or car loans, and wealthy people buy gold in kilos just like before. The middle class no longer exists.”
“Gold bars and lira are very marketable nowadays. There are some people doing business with gold. They buy gold bars or lira by the kilo when the price of gold falls and sell them when the price goes up, making good profit. In general, we can say that the business people who were previously investing in properties and cars have now turned to gold. Some people do not trust to keep their money in the banks. That is why they buy gold and sell it when the price goes up,” Khalil said.
According to official statistics, gold imports in the Kurdistan Region peaked in 2013 when more than $4 billion was spent importing 114 tonnes of gold from the United Arab Emirates and Turkey, making its way into the Kurdistan Region’s markets through Erbil and Sulaimani airports.
After 2013, gold imports decreased considerably, down to 77 tonnes in 2014, 56 in 2015, and 40 in 2016, an overall drop of nearly 65 percent.
“Due to the financial crisis, the halting of loans, and the ISIS war over the past three years, the gold business in the Kurdistan Region has become very weak. This has led to a reduction in gold imports,” said the ministry’s director of gold quality control, Bakir Aziz.
According to Aziz, before ISIS, much of the gold imported into the Kurdistan Region was in turn exported to Iraqi cities, predominantly Mosul and Baghdad. But after ISIS attacked, taking control over much of northern Iraq including Mosul, transit routes to transport the gold were cut off. This is why gold imports to the Kurdistan Region declined.
Aziz is, however, optimistic about the resurgence of the gold market, especially now that ISIS has been ejected from Mosul and other areas.
“The gold trade and imports are better this year. I therefore predict that the gold business will go back to how it was in 2013 over the next two years,” he said.
In the past, companies were mostly importing gold from the United Arab Emirates. Nowadays, Turkey has become the second (biggest) destination (to import gold from).
“Turkey facilitates much for traders of the Kurdistan Region and Iraq in order to compete with the United Arab Emirates. That is why nowadays 40 percent of the gold imported to the Kurdistan Region comes from Turkey,” Aziz said.
In the Kurdistan Region, there are some companies that import and export broken gold pieces, which they melt and then sell on to the Emirates and Turkey from where they import fashioned gold pieces.
Ardawan Najmadin, owner of the Qasr Imarat Company, imports gold and then sells it wholesale to more than 130 gold exhibitions in the Region.
“The continuity of the financial crisis has affected the sale of gold a lot. People are not as able as they were in the past to buy gold. Gold imports have therefore declined,” Najmadin said.
“Before the financial crisis, I sold nearly 300 kilos of gold to exhibitions every month. But nowadays I sell nearly 50 kilos of gold a month,” he detailed.
In the past, there was no tax on gold imports to the Kurdistan Region and owners of companies importing gold paid nearly 5 million Iraqi Dinars (IQD, about $4,300) a year to renew their company license. In 2014, a 10,000 IQD tax was imposed on every kilo of imported gold.
The general directorate of revenue tax issued new tax instructions in 2015. According to these instructions, companies should pay 5 percent of their profit for importing prepared gold and 3 percent for raw gold.
Government taxes are later added to the sale price, said Shwan Mohammed, deputy president of Erbil’s syndicate of goldsmiths.
There is hope the market will rebound, however. Nearly 100 gold exhibitions have increased in the province of Erbil alone over the past two years, despite the declining marketability of gold in the region.
“Goldsmiths are increasing day by day in the city of Erbil. Over the past two years, nearly 100 new exhibitions were opened in Erbil by the IDPs of Iraqi cities. There are currently nearly 500 goldsmiths in Erbil,” Shwan Mohammed, deputy president of Erbil goldsmiths syndicate, told Rudaw.