Gold’s Plunge Turns New York’s Diamond District Upside Down; “We currently have a line selling precious metals. I think it is type of paranoia. They are expecting gold to hit even lower than it is, and everyone is trying to get it in as fast as they can.”

Apr 15, 2013

Gold’s Plunge Turns New York’s Diamond District Upside Down

By Michael Casey

Few businesses have been impacted more by gold’s rollercoaster price ride in recent years than the 2,600 independent firms jammed into New York’s bustling Diamond District.

And since Friday, with the international price of gold falling more in dollar terms than in any previous two-day period since at least 1974, the activity on this crowded strip on 47th Street between 5th and 6th Avenues has gotten a little crazier. Gold dealers and their customers, accustomed to buying and selling according to the so-called “London PM fix” — the second of two daily benchmark prices set by a group of London bankers — had to adjust their reference prices by the minute as a plunging real-time market left them exposed to losses.

Roni Rubinov, proprietor of New York Gold and Silver Refiners, was forced to turn away one regular customer who’d come in toting a plastic bag of gold rings, necklaces and watches. The trading price was then at $1,370 per ounce, $25 less than the London fix, on which he had based his own delivery commitments for the day to larger wholesale refiners. By the end of trading Monday, the front-month April contract had settled on the Comex division of the New York Mercantile Exchange at $1,360.60 an ounce, down 9.4% on the day to mark a 13% decline in two days. “But I have a lot,” the man said. “Can you at least do half?” Since he was a regular customer, Rubinov, who owns both a gold dealing business and a pawnbroker, said he could have bought at a $5-per-ounce loss, but not at $25 down. He advised his customer to sit on his merchandise and wait for the price to come back at a later date. The man left, a despondent look on his face.“We currently have a line selling precious metals,” Rubinov said in an interview that he intermittently broke up with Spanish and Russian instructions to staff members to turn people away. “I think it is type of paranoia. They are expecting gold to hit even lower than it is, and everyone is trying to get it in as fast as they can.”

“Because of the fear,” he said, “the amount of gold that has been coming in over the past few days has been more than we expected,” exceeding the “guesstimate” that he’d locked in at the fix price.

Those rushing to offload their goods were professional dealers. They acquire gold jewelry from households and then deliver them to middlemen like Rubinov, who resell their takings to bigger refiners, where the rings and necklaces are melted out of existence and converted into bullion.

A different trend has emerged among retail customers, the kind who wander in off the street either to pawn their jewelry for loans or sell it outright. Their presence has waned of late, raising questions about the sustainability a gold boom that has seen the District’s slower-paced traditions of appraising and dealing in fine jewelry overwhelmed by a more frantic wheeling-and-dealing culture.

In the first three years after the 2008 financial crisis, as the price of gold tripled to a peak near $1,900 in August 2011, retail clients were a boon to Rubinov’s and his neighbors. Drawn by the rising price and by a need for cash in the credit-starved post-crisis environment, these retail customers provided valuable inventory, which could then be resold at a profit to refiners.

But now, Rubinov says, the inflow has dropped, a phenomenon he attributes to both the falling price and the fact that so much jewelry was sold or pawned after the crisis. “The market is somewhat dry,” he said.

Three doors down from Mr. Rubinov’s office, jeweler Yale Zoland isn’t too upset by this turn of events. As the boom took off, and the dealers’ scouts took over the sidewalk, confronting passerbys with offers to buy or sell gold, he and others with a long history of diamond dealing joined forces to tone things down. A local business association put up signs along the strip warning customers not to deal with hawkers in the street.

“We anticipate that if gold drops significantly, and if people are no longer selling gold with the same regularity…there will be less reason for hawks to be so aggressive,” said Zoland, a third-generation proprietor of Zoland & Son, which has dealt in diamonds and fine jewelry production for almost 90 years.
“Hawking taints the appearance of the street,” Zoland said. “It makes people feel uncomfortable… We want people to believe that 47th Street is a comfortable place, a safe place to buy or sell diamonds and jewelry.”


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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