Accessibility links

Breaking News

Romania: Higher Gold Prices Cause Rush To Sell

Bucharest, 4 April 1997 (RFE/RL) -- Romania is experiencing a touch of gold fever since the country's National Bank liberalized the price of the precious metal last month.

Long lines of people can be seen outside central bank subsidiaries across the country, carrying jewelry and any other type of gold object for sale to the bank. Since last month, the price of gold has jumped by more than two and a half times, from $5 to $13 per gram, and people with gold assets at home now consider they are getting a good deal by converting them into cash.

An RFE/RL correspondent in Bucharest reports that previously, the price of gold was fixed arbitrarily by the National Bank, without any market justification. As a result, nobody was interested in selling to the state. People turned instead to the black market or to individual jewelers for a better price -- but still far below what they are obtaining now.

National Bank officials say that now the gold price is aligned to the international market -- presently about $350 per ounce. How much people actually receive for their trinkets depends on the quality of the gold they contain. One gram of 24-carat gold brings $13, 18-carat fetches $10, and 14-carat brings $7.50

With the international gold price relatively stable, and the exchange rate of the leu currency against the dollar also stable (around 7,000 lei to the dollar), many Romanians are finding it more profitable to sell gold than store it at home.

The rush to sell is fuelled by the particularly good bank interest rates now on offer. Interest rates for cash deposits in March ranged between 100 percent and 160 percent annually. That's below the country's latest annualized inflation rate, but is still obviously considered attractive.

The same situation applies to silver as to gold. With the newly freed prices, a gram of silver now brings 20 cents, up from 7 cents at the beginning of the year. The liberalization of the two metals has come after Romania's monetary and foreign exchange markets were freed from state controls at the beginning of the year.

However senior central bank official Adrian Vasilescu told RFE/RL that the country is not yet able to establish a precious metals market, or a bullion market, in the way that that western markets operate.

A central bank spokesman also acknowledged that liberalization of the gold and silver prices is in line with other similar measures for energy, food, telecommunications and other basic prices. He said the authorities are "trying to demonstrate that all the markets are functioning by themselves, freed of any administratrative interventions, such as establishing prices unrecognized by the market." The government of President Emil Constantinescu is making sweeping reform efforts in Romania following years of post-communist rule.

The bank spokesman also said that the gold being purchased from the population is being transformed into bullion, and added to the national gold reserves. Those reserves totalled some 90 tons at the end of last year -- or approximately $1.3 billion. Romania's goldmining industry is producing in addition some two tons of bullion a year for the state.

Radu Busneag is a Bucharest-based economic journalist who contributes regularly to RFE/RL.