Wednesday, November 14, 2012

Syria’s Gold Market Thrives Amidst Civil War

Syria’s gold markets remains buoyant despite the ongoing civil war. 

Importantly events in Syria has been providing some insights on resident Syrians perceived value of gold.

For these economically marginalized by the war, gold has been sold in order to raise cash

In a Damascus jewelry shop, the customer’s jaw drops when he hears what he is being offered for his gold ring. Barely $100. “Can’t you do any better?” he asks timidly before accepting the deal.

After nearly 20 long months of conflict, many Syrians are now digging deep into their pockets, with many having to sell their jewelry -- including family heirlooms -- just to survive.

The conflict between government troops and the rebels may have brought the economy to a stalemate, but the gold market is experiencing an unprecedented frenzy.

For those who have lost their livelihood with the closing down or destruction of their workplace, selling off jewelry is an unwelcome but necessary option so they can feed their families.
Because gold has not yet been recognized as money on the street levels, and because gold is yet considered an asset, economically marginalized people prefer cash over gold.

The point here is that gold hardly signifies hedge against “economic hardships” or what others would (mis) classify as “deflation”.

But it has been a different story for those who have savings

From the same article:
For the rich, the precious metal represents a bulwark against the collapse of the Syrian pound.

According to Sonia Khanji, a member of the Damascus Chamber of Commerce, 30 percent of small and medium enterprises in the country have now closed, throwing roughly a quarter of the workforce out of a job.

Long accustomed to stable prices and currency, Syrians have seen rampant inflation reduce their purchasing power by one third since the revolt against the regime of President Bashar al-Assad broke out in March 2011.

Damascus blames the country’s economic woes on sanctions imposed by Europe and the United States, whose administrations accuse the regime of conducting a bloody crackdown on its own people.


Blaming external factors has been a mechanical response by almost every politicians.  In reality, wars are mainly funded by inflationism. 

The Syrian government recently announced a significant spending hike to cover salary increases (+13%) and subsidies on food, fuel, power and agriculture (+25%), apparently to buy popular support even when the economy has been hit hard by the rebellion.

Yet without sufficient tax revenues to cover the added expenses including the existing ones, then the Syrian government may have already become dependent on her central bank for financing, thus the recent spike in price inflation (chart from

And many Syrians see gold as safe haven of their savings against monetary inflation

Again from the same Al Arabiya News article
Today, those who still have a steady income put their faith in gold.

“People prefer to buy gold or sterling ounces rather than trinkets,” Mdari says, adding that people are hunkering down for a protracted period of unrest.

“People have lost faith in the national currency. Whenever new economic sanctions are announced, I notice that the rich flock to buy gold. They believe that acquiring the yellow metal offers security,” says Michel, a jeweler.

Damascus industry professionals agree that the precious metal provides a form of savings that appreciates in times of political and economic uncertainty.

“To save money, people prefer gold. They fear a rising dollar and the fall of the Syrian pound, and gold is easier to transport if we need to leave quickly,” said Hisham, a goldsmith on Abed Street in downtown Damascus.
In the real world, gold represents a hedge against currency inflation.

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