Shops in Portugal that buy and sell unwanted gold are closing in increased numbers due to the “abrupt” depreciation in the value of the precious metal across international markets.
According to data released by Golden Broker, between April and December 2013 over 60% of so-called cash-for-gold shops ceased trading as gold prices have tumbled. Over the nine-month period, the price of gold fell steadily from $1,600 per ounce to $1,200 per ounce.
Massive oversupply and vigorous high street competition are also cited as contributing towards the rapid decrease in sales.
Six years have elapsed from the start of the economic crisis, and the Portuguese are relying less on the sale of gold to high street shops as they adapt to the crisis and the need to reduce consumption, explained João Pinto, a trader with the Porto-based brokerage.
The boom years of 2008 are over and the days of buying and selling gold in this way “are numbered”, he predicted.
Speaking to Dinheiro Vivo, he outlined the reasons behind the rapid growth of these controversial businesses that tempt consumers into parting with jewellery and coins for rock bottom prices.
“There were several factors that led to the rise in this kind of business. Firstly, between 2002 and 2011, the gold price appreciated 537%, a quote that determined the high expectation of continuous and sustained levels in value.”
At the same time, the lack of liquidity and the difficulty in accessing credit led to the sale of goods being seen as a quick fix solution, when consumers had to adjust quickly to the burgeoning financial downturn.
“When these shops started to appear, there was very little competition and were therefore protected against any fluctuation in gold prices. They could discount jewellery by up to 30%.”
As it stands, the current market value means that Portugal’s ‘gold shops’ will continue to struggle, with the public less likely to sell personal artifacts and cherished family heirlooms.
