Australia’s lust for gold wanes

Australia's tougher economic conditions mean demand for gold is sliding as well as real estate.

Following the Reserve Bank of Australia's recent decision to keep interest rates the same, Australian Gold Capital chief executive Michael Kukulka says the Australian market for gold and silver is cooling after the biggest boom the industry he has ever experienced.

"The industry had a six-month period between October last year and March this year where the demand for gold was unlike anything we have seen before,'' said Mr Kukulka.

"Maybe it was a case of people fearing for the future of the economy but since the end of March the market has cooled significantly."

Mr Kukulka said consumers who were struggling financially generally chose to sell jewellery during tough times but those who had sold property quite often invested in gold.

"Gold is perceived by many people as being a safer asset than holding cash in a bank," he said.

"A big proportion of our customer-base is made up of everyday Aussies and many of them, because of cultural beliefs or their own life experiences, tend to shy away from putting all their assets into the banking system.

"Gold can be sold or pawned instantly almost anywhere in the world, no matter the political environment you are in.

"The Indian community in Australia is traditionally a very strong buyer of gold, especially around the time of their religious festivals.

"For them buying gold is a part of their cultural traditions, their religious beliefs, and also provides some measure of financial security."

Mr Kukulka said one of the biggest challenges for people who wanted to buy precious metals were coming from their own banks.

"The banks are exercising extreme caution with large transactions and are making it more difficult for people to buy gold bullion,'' he said.

 "Banks will often block or reverse payments to businesses such as ours on the grounds that the transaction is a 'potential scam' or 'fraud' despite what their customers want.

"This type of extreme banking behaviour is unfortunately becoming more commonplace and it seems the banks are determined to hinder people from investing outside of the financial services industry."