Gold emerges as an attractive investment tool as prices jump

Throughout 2024, gold seemingly became synonymous with price hikes amid economic turbulence, a weakening taka and plummeting interest rates on savings tools, making the precious metal a safe bet for middle and upper-middle-income people, according to jewellers.

They said many higher middle-class and middle-income earners in 2024 rushed to buy gold coins and small bars, while retail sales of gold ornaments dipped as much as 50 percent year-on-year.

Last year, gold prices were adjusted 62 times, with upward adjustments surpassing downward adjustments by 35 times, according to Bangladesh Jeweller’s Association (Bajus) data.

The yellow metal gained 24.53 percent year-on-year to Tk 138,288 per bhori (one bhori is equal to 11.664 grams) in 2024, according to the association.

“Investing in gold has become more profitable than savings certificates and various bank deposits,” said Masudur Rahman, vice-president of Bajus.

He said many people are now investing in gold for a good short-term return. “Specially the middle-class and upper middle-class people are now investing more in gold.”

“Although the local gold market had been quite volatile over the last two to three years, it caused no concern for gold investors,” Rahman told The Daily Star.

At times of economic uncertainty, brutal price pressures, economic slowdown or repression, people historically tend to hold on to gold as the metal offers gains somewhat immune to these bumps.

Besides, gold offers a high level of liquidity, which means people can easily turn their holdings into cash.

Since March 2023, the country has been facing stubbornly high inflation, hovering above 9 percent.

For savings, the price pressures mean that if the returns are below or equal to inflation rates, savers will be adversely affected.

With inflation hitting 11.38 percent in November 2024, currently available national savings certificates offer almost similar gains ranging from 11.76 percent to 11.52 percent.

In contrast, according to jeweller platform leader Rahman, if someone buys a gold ornament, coin or bar worth Tk 2 lakh and sells it within two or three weeks, they will pocket a handsome profit of around Tk 10,000 per bhori.

“And if they sell it after a year, the profit will be even higher because the market is consistently showing an uptrend,” he added.

In June 2022, the price of per bhori gold in the local market was Tk 77,216, which has increased to Tk 138,288 now, down from the highest price of Tk 143,000 recorded in October last year, Bajus data show.

RETAIL SALES DOWN BY 50%

Amid the price volatility, local jewellers said their sales last year declined by about 40 to 50 percent compared to the previous year.

They said current domestic price fluctuations are due mostly to surges in gold prices in the international market and the local currency Taka losing ground against the US dollar.

Reponul Hasan, owner of the Jewellery House in old Dhaka, said that if the prices of any product fluctuate frequently, it will certainly confuse buyers and affect sales.

Due to the price fluctuations of gold, eventually reaching record highs, he said that his year-on-year sales have declined by 30-35 percent.

Jewellers’ leader Rahman, also chairman of the Bajus standing committee on pricing and price monitoring, said that local prices are set in coordination with the international market and retail sales dropped 40 to 50 percent last year due to the price fluctuations.

If the demand of a product is high and it is not available in the market as per demand, the prices will naturally go up, he added.

In the global market, gold prices marked 2024 as a record-breaking year as robust central bank buying, geopolitical uncertainties and monetary policy easing fueled the safe-haven metal’s strongest annual performance since 2010, according to reports.

According to government estimation, the country needs 20 to 40 tonnes of gold per year.

The commerce ministry says almost 80 percent of the demand is met through smuggling and the rest by recycled gold.

Industry insiders said that the high taxes on imported gold were the main reason companies felt more comfortable sourcing gold from unauthorised channels.

Bajus said that gold worth roughly Tk 73,000 crore is smuggled in every year.