Gold Demand ‘Remains High’

By KYAW HSU MON / YANGON

Purchasing gold has long been a way for Myanmar people to accrue secure savings, particularly in the absence of an efficient banking system. Today the gold market remains steady in a country with stilllimited access to financial services. U Kyaw Win is the secretary of the Myanmar Gold Entrepreneurs Association, senior vice president of the Myanmar Gold Development Public Company and the owner of the U Htone gold shop. In this interview he offers his assessment of the local gold market.

When did you start your business and what were the main early challenges?

My father [U Htone] started working in the goldsmithing industry more than 80 years ago, when he was aged 17. Gold has been our family business ever since. In 1994, I opened the first U Htone gold shop, and I opened another in 2000.

As far as I recall, when I was a high school student, the price for one tical [16.33 grams] of gold was only 200 to 300 kyat. At that time, selling gold ornaments was the only money-maker for us. But five to 10 years later, gold prices reached 3,000-4,000 kyat per tical.

Under the Burma Socialist Program Party (BSPP), there were continuous rumors about the demonetization of the kyat and gold prices were extremely volatile. People purchased a lot of gold when they heard those rumors, especially around 1985-86. At one stage, the gold market was so strongly affected that I stopped all sales in Yangon.

The government demonetized the 100, 75, 35 and 25 kyat notes in that period. People then thought they should purchase gold. Even when the military government announced it would print new 1,000 and 5,000 kyat notes in 1995 and [2009], gold prices stayed high. Also when the government raised civil servant salaries, gold prices still increased.

When the civilian government took power, they fixed the exchange rate and gold prices stabilized. People now know how and when to invest in gold because of information in the media.

When did Myanmar people begin accruing gold for future investment?

Since the time of the royal dynasties, Myanmar people have saved gold. People have long loved to wear gold at events, as well as to save it for longterm benefit.

After the Second World War, people were even more interested in gold. Although the banking system has recently become more active, the custom of saving gold will not disappear as people still love it. It is a [savings] method that can always reap benefits.

When were gold prices at their peak?

The peak time was around the first Iraq war in the early 1990s; world oil prices increased as well as gold prices. The price of gold increased from around US$33 to $1,900 per ounce in 2010. After 2010, gold prices declined again and are now at about US$1,100 per ounce. I don’t think prices will fall soon. Gold on the Myanmar market increased to 800,000 kyat per tical when the world price was about $1,900 per ounce. It has declined to about 680,000 kyat per tical now. But the price in Myanmar hasn’t declined as significantly as the world price, due to inflation here.

How does inflation affect the gold price?

I think it’s because of the weak banking system here. In other countries, when they sell or buy property, they don’t need cash. But here, [physical] cash is essential for everything. With more economic growth, the cash requirements are greater and inflation is also rising. We need a lot of [physical] money