Gold rush
Published:Sunday | June 27, 2010 | 12:00 AM
Local jewellery stores and man on the street making big bucks from cash-for-gold trade
Tyrone Reid, Sunday Gleaner Reporter
There is a method to the cash-for-gold madness gripping Jamaica. According to industry players, the price of gold has more than doubled in the last four years and the strong lure of lucrative profits in United States (US) dollars is what is pulling both upscale jewellery stores and men on the street armed with bullhorns into the cash-for-gold trade.
Even nefarious characters - including the two major criminal gangs operating out of Spanish Town, St Catherine - are attempting to cash in on the burgeoning gold trade, the police have theorised.
The police have recently arrested several persons walking the streets in the cash-for-gold business and charged them with breaching the Metal and Jewellery Act of 1967.
However, the maximum sentence for trading in gold without a licence is a paltry 10 days' imprisonment and a fine of $200.
For those legitimate dealers, the returns can be quite lucrative.
Price
Steve Khemlani, chief executive officer of Jewelerama, told The Sunday Gleaner that back in 2006, a troy ounce of 24-karat gold was being sold for US$600, but last Tuesday, a troy ounce was being sold for US$1,236, down from US$1,261 the previous Friday.
"The price of gold is directly related to the US currency. When the dollar is strong, the price of gold weakens, and vice versa," said Khemlani, whose store caught the cash-for-gold fever eight weeks ago.
However, persons interested in selling their gold to Jewelerama must present an identification card for the process to begin.
Next, the purity of the metal is tested before an offer is made. After purchase, the gold is melted and shipped to various refineries in the US.
"The refineries will refine it to 24-karat, which is pure gold, and then they would pay us for it," Khemlani said as he explained the cash-for-gold's chain of distribution.
For security purposes, different methods of shipment are used by the cash-for-gold traders, none of which were revealed.
But the distribution chain stretches further. After being refined to pure gold, the precious metal is then converted into bars and sold to large investors.
"Historically, it (gold) has been the safest investment. You cannot lose off gold," Khemlani said.
He opined that the world has gone back to the days of old when gold was currency.
According to Khemlani, people have bought into selling their gold because they see converting the precious metal to cold, hard cash as the more frugal and safe route to paying off their mounting bills, as the world recovers from the worst recession since the Great Depression.
Big bucks
"They don't want to borrow money or run up their credit cards. They are being prudent," he said.
Khemlani revealed that one individual's chain was bought for $188,000. He explained that the weight and alloy of the 14-karat jewel was what commanded such a hefty price.
Cash-for-gold traders are not reluctant to shell out big bucks for the precious metal because they usually make between 20 and 25 per cent on their investment before taxes.
Other store owners were reluctant to speak on the record. The American Jewellery Company is involved in the cash-for-gold trade.
However, the manager, who spoke on condition of anonymity, was reluctant to admit that his store bought gold locally and sold it to refineries overseas.
At first, he said the gold purchased locally was used to satisfy the demand that exists in the company's factory for the production of graduation rings.
But after being pressed by our news team, the manager admitted that he "thinks some of it does go overseas".
On the other hand, Vikas Bamani, floor manager at Pavilion Jewellers, said the store was not involved in the cash-for-gold trade.
However, Bamani said the company espoused its own brand of swap for gold, where a customer brings in an item and exchanges it for something of equal value.