Gold price increasing rapidly

On January 19, the price of gold per gram in Dubai was 213 AED, 5188 rupees in India, and 8010 taka in Bangladesh. Accordingly, the price of one bhari of gold in Dubai is 72,222.4 taka and in India, 79,410.95 taka. But in Bangladesh, the price of one bhari of gold is Tk 93,429, and 11.664 grams contain one bhari. How accurate is it? Why is the price of gold so high in Bangladesh?

It is apparent that the gold price in Bangladesh does not match the international market. A medium-quality gold shop has to keep at least 40 to 50 bhori of gold in stock. Otherwise, doing business becomes difficult. But it is being speculated that many small and medium-sized traders in this sector will not be able to sustain themselves, given the rate at which the price of gold is increasing. Those who have sustained themselves in this business for many years, where will they go in this crisis? Why is the gold market in such a state?

It is widely thought that gold prices are correlated with inflation. When inflation is higher, gold prices are higher as well. Inflation in the price of gold was noticed more during the Corona period. In the first week of August 2020, the price of gold exceeded $2,070 per ounce, which is the highest ever. In 2021, the price of gold did not rise much. However, when the Ukraine-Russia war started in the last week of February 2022, the world economy fell into jeopardy. Then inflation started to increase in various countries. The price of gold also increased. On March 8 of last year, the price of gold exceeded 2 thousand dollars per ounce in the world market. In October, it dropped to $1,650. After that, at the end of the year, prices started to rise again. On January 15 of this year, the price of gold rose to $1,920 per ounce. Apart from inflation, what are the reasons for this fluctuation in gold prices?

History and statistics show that gold has always been valuable and loved by people worldwide. Gold is a metal that can be molded to form anything, including jewelry, and whose value never decreases. For this reason, it is highly valued worldwide. Generally, the price of gold rises during times of war. The recent Ukraine-Russia war made people around the world increase their investment in gold. Central banks in various countries, including the United States, increase policy interest rates to control inflation. At this time, people withdraw money from gold and invest in bonds. In some countries, there are signs of easing inflation due to consecutive months of policy interest rate hikes. Many feel that even if the policy interest rate rises in the coming days, it will not be that fast. Because of this, investors around the world have again left bonds and focused on buying gold. For this reason, both the price and demand for gold are increasing. What is the extent of the impact on Bangladesh, and how has it manifested itself?

If the price of gold increases in the global market, the price of gold also increases in Bangladesh, says the Bangladesh Jewelery Association (BAJUS). They decide the price of gold in this country. How much does it increase or decrease in accordance with the international market? It is known that there is a lot of difference in the price of gold compared to the international market. In the past few years, it has been seen that the price of gold per bhari in countries in the Middle East is lower than here by 8–10 thousand taka. The price of gold in Bangladesh is higher than in any other country. Why? There might be a concrete answer to this question, but no one, it seems, can manage to figure it out. Basically, the syndicate is responsible for this. They control the gold market in Bangladesh. So what is the government's responsibility here?

In December 2022, the price of gold per 22-carat weight was 84 thousand 214 taka. Since then, the price of gold has increased four times. The price of 22-karat gold has risen by 9 thousand 215 taka as a result of this. The last price increase was on January 15. Now the price of 22-karat gold is 93 thousand 429 taka, which is the highest in the history of the country. Prices for 22-karat and other-carat gold are comparable as well.

How is the current gold market? Currently, the demand for selling old gold has increased. Many people are breaking down old gold and designing new ornaments. As the price of gold rises, it is profitable for those who are scrapping old gold and making new gold. In the 20th market, the price of gold per ounce may again exceed two thousand dollars. If that happens, then the gold reserves in our country may exceed one lakh taka. Last year, when the price of gold was 2,000 dollars, the dollar price in our country was 85–86 taka. Currently, the price of the dollar in the country is over 100 takas. So the relative price of gold is higher now. Even if traders give the reasons for the increase in the price of gold in the country, it can be understood that there is discrepancy in the accounts.

The amount of gold is usually 16 annas to one bhari and 6 ratis to one anna in our country. In foreign countries, it is considered a gram. The purity of gold depends on the karat. The karat is used to indicate the type of gold a piece of jewelry is made of. Why this carat system? What is in this carat? It is known that a 22-carat full ornament contains 14 annas and 2 ratis of pure gold. 14 annas of pure gold are contained in 21-carat ornaments and 12 annas in 18-carat ornaments. Although traditional gold ornaments are not made in the country now, one bhari of Sanatan ornaments is said to contain at least 10 annas of gold.

Carats are important for another reason. Even a decade ago, there was considerable chaos in the gold trade in the country. At that time, there was no specific rule about how much gold one would get if one wanted to sell gold ornaments. It can be said that the jewelers used to cheat the seller. He would pay as he wished. The carat system and hallmarks eliminate this problem. In 2007, Hallmark was made mandatory by the Jewelry Association. A hallmark is a method of writing on an ornament the type of gold the ornament is made of. For example, 22K is written on the ornament—this is the sign of the hallmark. This allows buyers to check the type of gold they are buying while buying jewelry. When he goes to sell that gold, there is no need to prove its quality. It can be understood by looking at the carat written on the hallmark. Jewelers cannot raise any kind of complication over that. For this, hallmarks and carat are very important.

There is also a good trade in buying and selling gold items. There is a rule: selling the jewelry at the shop from which it was bought will fetch the best price. 20 percent is deducted from the original price if sold at another store, and 15 percent is deducted if jewelry is purchased at that store instead of jewelry. If you take cash, 10 percent is deducted. Although new rules have recently been introduced to change or sell gold, they are not being followed across the country. Besides, even if there is no hallmark on any gold, it can be determined by a machine whether the gold is 18, 21, or 22 carats.

What will the price of gold increase to? This is the question that everyone is asking right now. Whenever there is a hint of disaster in Bangladesh, there is a class of people who buy gold. People with a lot of money and influence, in particular, buy gold. Since Corona, it has been seen that even the common middle class is saving some money and buying as much gold as they can instead of other things. Some people think that since the price of gold will increase or cross lakhs of taka, they are buying necessary gold items for their children's weddings even in this difficult time.

The way gold is used and invested across the world, the market in Bangladesh is very small. Although there are no specific figures here, it is known that there is an annual demand of 20–40 tons of gold in the country.

Of this, 10 per cent of the demand is met with old or sanatani gold. The rest of the gold comes here from abroad through the baggage rule. It is said that a large amount of gold is brought into the country illegally. Bangladesh Bank has granted gold import licenses to 19 institutions, including a commercial bank, to restore transparency in the gold market and jewelry business. In the beginning, they imported some, but now it has decreased a lot. The reality is that Bangladesh's gold market heavily dependent on the baggage rule.

There is a difference in the price of gold in Bangladesh compared to the international market and even India. The government needs to pay special attention to this sector to normalise this price variation.

Since many aspects of the culture of Bangladesh is associated with gold, people of all classes in this country buy gold, even if in small amount, for weddings. It needs to be seen that it is within the reach of people. People will be satisfied, especially if its price is in line with the international market. It is claimed that due to the lack of gold refineries, the cost of refining gold is high, as is the price for this. The government should set up a gold refinery as soon as possible. Small and medium traders who have been doing business for ages will be lost due to the high price of gold. Some facilities can be given to them so that they don't get lost or so that they can do business. There are many skilled craftsmen and tasteful businessmen in this sector who do excellent work, and they are needed in this sector.

The writer is a freelance columnist. She can be contacted at shanu.mostafiz@gmail.com