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$20 gold premium sparks debate in domestic market

Gold price up by Rs700 per tola
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October 23, 2023 (MLN): In a bid to address the turbulence in the domestic gold market, the president of the All-Pakistan Sarafa Gems and Jewellers Association (APSGJA) reached an agreement with all provinces to charge a premium of $20 on top of the international gold price for a unified domestic gold rate calculations.

However, this introduction of the hefty $20 premium has raised significant concerns about the overall stability and transparency of the domestic gold market.

To recall, in the wake of the government-backed crackdown aimed at restricting illegal dollar outflows and stabilizing the Pakistani Rupee, the domestic gold market unveiled significant irregularities.

The crackdown, which began in early September, further complemented by various administrative measures, brought back the Pakistani Rupee from the brink of collapse.

This prompted investors to rush to accumulate gold at lower rates to hedge against USD.

Accordingly, the domestic bullion saw a surge in gold transactions, attributed to the dollar’s declining value, which led the authorities to crack down against gold dealers, causing panic in the bullion market.

Resultantly, major domestic bullion jewelers like the APSGJA temporarily closed down for almost a month.

This highlighted the unregulated nature of the domestic gold market, where disparities in rate calculations prevailed among different jewelers in various provinces, raising concerns about the lack of a singular methodology for determining gold prices.

To enhance transparency and standardize gold pricing, the State Bank of Pakistan (SBP) took a significant step earlier this month, authorizing all gold dealers to calculate domestic bullion rates using the interbank exchange rate. 

However, upon the reopening of the markets, disparities in gold rates still persisted.

In response to these inconsistencies, the president of APSGJA along with other jewelers decided to charge a premium of $20 on top of the international gold price, to unify domestic gold rate calculations.

The premium, which was allegedly aimed at providing some stability, has added to the existing irregularities, causing further doubts about the market's transparency and overall reliability.

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Posted on: 2023-10-23T21:22:55+05:00