Gold Shortage Spurs 10% Deposits in Manhattan's Diamond District

“Prices are rising every day, so I’m not sure if now is the right time, but I’ve decided to sell anyway,” said Benjamin Retor, whom The Kore...

“Prices are rising every day, so I’m not sure if now is the right time, but I’ve decided to sell anyway,” said Benjamin Retor, whom The Korea Times met on the afternoon of the 14th at the ‘Diamond District’ on 47th Street in Manhattan, New York, where diamond and gold trading is most active in the U.S. He stood at the end of a line stretching outside the entrance of the jewelry and luxury items store ‘Bullion Exchange.’ Already, around 10 people were waiting to sell gold despite the chilly weather. People entering gold dealers could be easily spotted throughout the street. The Wall Street Journal (WSJ) reported, “A gold investment frenzy is sweeping Manhattan’s Diamond District.”

On that day, the international trading market saw gold spot prices continue their upward trend, hitting a record high. According to Reuters, gold spot prices rose 0.9% from the previous day to $4,145.85 per troy ounce (approx. 31.1g). During trading, prices even reached $4,179.48. The London jewelry and luxury items exchange announced a price of $4,135 that day. This marked a roughly 20% increase from a month ago (the 14th of last month, $3,435). Reuters reported, “Expectations of a U.S. Federal Reserve interest rate cut at the end of this month, combined with renewed tensions over the U.S.-China trade war, have driven investment into safe-haven assets.”

Out of approximately 2,600 jewelry stores in the district, around 50 handle gold bullion and other physical gold. As gold prices soared, both buyers and sellers increased. Kim Nam-pyo, president of ‘Kim’s Jewelry,’ which has operated for 45 years, told this newspaper, “Gold is in short supply. We can’t sell enough even if we wanted to.” Some stores reportedly have customers paying a 10% deposit to reserve purchases due to a shortage of gold bullion. Sandro Lagowski, CEO of ‘Gold Buyers,’ told the WSJ, “So many people are selling gold that our store is running out of cash,” adding, “Recently, a gold seller even asked for a certified check, so I had to accompany them to the bank.” Silver prices have also surged alongside gold. Silver prices rose approximately 42% to $51.24 per troy ounce that day, up from $36.08 a month ago.

While no one can definitively predict how long gold prices will keep rising, Wall Street forecasts that the trend is likely to continue for the time being. Generally, when interest rates fall, the opportunity cost of holding gold decreases, increasing its attractiveness and demand (leading to price increases). After Jerome Powell, chair of the U.S. Federal Reserve, stated at the National Association for Business Economics annual meeting that “downside risks to employment have increased,” the Financial Times (FT) reported, “Powell signaled support for additional rate cuts as the U.S. job market cools.”

Peter Grant, vice president of U.S. jewelry and luxury items dealer Gener Metals, told Reuters, “Heightened U.S.-China trade tensions, ongoing government shutdowns, and expectations of further Fed easing policies are all supporting gold prices.” Bank of America Global Research projected on the 13th that “gold prices could reach $5,000 per troy ounce by 2026.” However, some warn of overheating in investments. The FT stated, “It’s difficult to determine whether gold is too expensive or cheap, making it hard to time an exit,” adding, “Recent days have seen heightened U.S.-China trade tensions further fueling the gold-buying rally.”