Sales of gold unlikely to be affected by GST
Published on: Monday, April 20, 2015
Kota Kinabalu: Sales of gold is not expected to lose its shine in the local market at least in the immediate future, thanks to a steady clientele of foreign buyers from around the region.It is still early days yet but the implementation of the six per cent Goods and Services Tax is not expected to have much effect on local retail, said Sabah Goldsmith Association President Alex Lo. But like fuel prices, gold prices in the retail segment fluctuate according to world trade and with world prices going down presently, local retail prices only increased by less than 10 per cent with the implementation of the GST on April 1.
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Prices in the retail market are relatively standardised, with the association absorbing the GST into the base prices of gold weight. At present, 24 karat, 22 karat and 21 karat gold prices are set around RM180, RM170 and RM158 per gram, respectively, with goldsmiths raking around 15 to 25 per cent profit for workmanship. A small margin, considering the charges set out by factories in the peninsula, which charge 30 per cent more for the workmanship on top of the raw gold prices. "But there had been no gold rush here," said Lo, adding, "local consumers focused more on daily essential buying weeks before the GST implementation."
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However retailers are not overly-worried given that over the past decade or so, the local gold market had been largely sustained by the steady amount of buyers from the Philippines and Indonesia. "It's because of the quality of our local gold," argued Chang Ban Loong Goldsmith's proprietor Stephen Chang.
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While local gold-buying interest is largely driven by weddings, birthdays or celebrations, Chang said the Filipinos especially understood the value on saving physical gold. "Gold is resilient. It would always have value, in times of crisis like war, its prices would definitely go up, unlike cash which would not be of any interest if its value drops," he said. "It also acts as a fast safe deposit, when cash is needed during an emergency," said Chang, of the value of gold to the pawnshop. Still, a reason behind the gold interest from our foreign visitors is due to the strict policy which controls the quality of Malaysian gold, explained Lo. Under the Trade Description Act (Articles Made of Precious Metal), those who are found keeping in their retail cache gold of impure quality could be fined up to RM100,000. The law was enforced in the mid-90s that saw the trade in gold leaf of 99.9 per cent gold mixture to alloy, and the pound gold was abolished in the local trade. The purity of gold was then valued based on these gold standards 999, 950, 916.6, 875, 835, 750, 585 and 375. "Before the law was enforced there was no telling the amount of alloy in pound gold, the trade was rampant and the value of gold dropped significantly," Lo said. The introduction of the law has driven gold-buyers from Indonesia and the Philippines to Sabah, while Malaysia is hailed as one of the best gold suppliers in the world, exporting mainly to Dubai. "The Philippines does have its own regulations on the trade, but it is not enforced like how it is in Malaysia, that's why many of them would come over to Sabah to buy gold," said Lo. Stay up-to-date by following Daily Express’s Telegram channel.
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