KARACHI: As mystery shrouds the lack of transparency in fixing of daily rates, speculation and smuggling after the crackdown on precious metal trade by law enforcement agencies last year, the price of one tola gold surged to another all-time high of Rs263,700 on Saturday, up by Rs1,700 per tola over the previous day’s rate.

As per rates issued by the All Sindh Saraf and Jewellers Association (ASSJA), the 10 gram rate swelled by Rs1,457 to Rs226,080, based on a $20 per ounce rise in world gold rate to $2,512.

Surprisingly, the ASSJA has raised the rate of one tola by Rs1,000 since Thursday (Aug 22) despite a drop in world prices by $20 per ounce.

Many market people and even consumers appear sceptical over the mechanism of fixing daily rates amid fluctuations in world markets, rupee-dollar parity and the demand-supply situation.

They also wonder that since Pakistan does not import the yellow metal either in small or bulk quantities, why are rates determined on a daily basis.

Jewellers had come under the radar of law enforcement agencies (LEAs) back in the second half of last year over reports of speculation, malpractice, smuggling and hoarding. This led to the arrest of five jewellers over illegal activities despite the fact that ASSJA, led by Haji Haroon Rasheed Chand, was holding negotiations with the LEAs.

Last year. the association had suspended the publication of daily gold prices from Sept 13 to the third week of October. Later the traders were released on assurance that the association would help control speculation, encourage physical trading, promote legal trading practices, and improve documentation and computerisation within the trade.

At that time, upcountry gold traders started issuing their own rates, deviating from an understanding to bring uniformity in gold prices all over the country based on the rupee-dollar parity in the interbank market instead of the open market.

One benefit from the meeting between the gold trade body and LEAs was the issuance of daily gold rates between 12noon and 1.30pm instead of the previous practice of doing so in the evening.

No documentation

But contrary to promises made to LEAs, hardly any shop has adopted computerised trading for proper documentation. Consumers usually do not get any computerised receipt for new and old gold trading, but jewellers insist that consumers provide old cash receipts for selling their old items.

While trying to defend the lack of transparency, a gold trader said demand and supply, world market prices and exchange rate parity determine daily price fixation.

Sometimes the domestic gold price falls “under and over cost” than the Dubai or international market and on some occasions, the local rate and Dubai rate become equal, he added.

He claimed there was now “total transparency” in fixation of rates and that only physical trading was being conducted.

However, he agreed that documentation was taking time, but added that efforts were underway to fully document the bullion trading.

It is not clear how many gold traders are integrated with the Federal Board of Revenue’s point-of-sale (POS) system.

On gold consumption amid no official imports, he said old gold bars in the shape of assets preserved by families, old jewellery and Pakistani passengers arriving from abroad usually keep the bullion trading alive.

Absence of regulator

Habibur Rahman, chairman of the Pakistan Gem and Jewellery Traders and Exporters Association (PGJTEA), said the country had not seen any official commercial gold import for the last 15 years while there is no regulatory body to determine prices.

As a result, the government did not pay any heed to regularising the price fixation mechanism, leaving various associations to issue daily rates on their own.

“The federal government must set up a regulatory body for issuing daily bullion rates, allowing commercial import by ensuring that the State Bank will release foreign exchange for import,” he said.

The State Bank can either fix the quantity of commercial imports like 500 kgs or one tonne a year, or it can allocate an import quota like $100 million or $500m a year so that regular import could start.

Habibur Rahman said 25 per cent of gold demand was met through smuggling while the rest through the arrival of old gold bars and jewellery sets.

Mohammad Haseen Qureishi, the chief of All Karachi Jewellers and Manufacturers Association, said the government should set up a powerful regulatory authority after taking on board market representatives.

“Daily rates should come from the government authority. It will end speculative trading and other issues,” he said.

Published in Dawn, August 25th, 2024