Bangladesh’s love for gold failing to shine through prohibitive prices

Rising prices are causing a decline in customers at gold shops

For Arafat Hossain, marriage was a dream he had been carefully nurturing. Yet, as he prepared to step into a new chapter of life, he found himself entangled in a modern dilemma: the rising cost of tradition.

In a world where wedding traditions often demand gold jewellery, his journey turned rocky as gold prices kept spiralling out of reach, leaving the private sector executive with a difficult choice – delay his dreams or push forward, heart first.

With determination—and a bit of sacrifice—Arafat decided to move forward. He dug deep into his own savings and dipped into his parents’ hard-earned funds to buy the gold that was expected.

Still, the reality hit hard. His budget, already stretched thin, could not match the vision he had so vividly imagined.

“I wanted to buy 80 to 90 grams,” he shared, a trace of disappointment in his voice. “After going beyond my budget, I thought maybe I’d manage 70 grams for Tk 700,000. But I could only buy around 57-58 grams.”

Frustration seeped into his words as he spoke of the relentless price hike. “Gold prices have jumped by around Tk 30,000. I’m done buying gold now,” he said, a hint of resignation marking the end of his gold-buying journey—at least for now.

GOLD PRICES ARESOARINGMost recently, on Nov 8, the BangladeshJewellers Association, or BAJUS, adjusted gold prices in line with the globalmarket.After the adjustment, the price ofhigh-quality 22-carat gold per bhori (11.66 grams) reached Tk 138,708.In addition, 21-carat gold per bhori now costsTk 132,398. The price of 18-carat gold per bhori has been set at Tk 113,491,while traditional gold costs Tk 93,160 per bhori.The price of silver has also increasedalongside gold, with the metal nowreaching Tk 2,624 per bhori.

IMPACT ON SMALL BUSINESSES

The rise in prices has led to a decline in customers at gold shops.

Md Sohel Rana, a salesperson at Papri Jewellers in Tanti Bazar, said: “Customers are very few. Sales have dropped as well. Previously, customers would buy 3-4 bhori of gold, but now they struggle to buy even 1 bhori.”

This downturn has been ongoing for almost six months, he added.

In such a situation, small and medium-sized business owners are relying on ‘hidden charges’ to sustain their profits. Jewellers add a 5-6 percent making charge to the gold price, along with VAT.

However, Arafat sees this as a ‘thorn in the neck.’ He remarked, “The prices are already high. On top of that, there’s an extra 5 percent VAT and a 6 percent making charge. This hidden charge is a real pain.”

OPPOSITE PICTURE IN PAWNING

With rising prices, people with limited incomes are sometimes resorting to pawning their gold jewellery to cope with the high inflation rates.

However, when they visit pawn shops, they do not receive the expected prices. Instead, they are told prices have not gone up; they are actually declining.

Since they are not buying, they cannot even challenge the actual value.

Sultana Khanam, a homemaker from Faridpur, shared: “Hearing that gold prices had increased, I went to pawn the jewellery my husband gave me. Now the jeweller is saying prices haven’t gone up. They’re only offering between Tk 80,000 and 90,000 per bhori based on the gold’s quality.”

Bushra Tasnim had a similar experience.

“Living in a village, we don’t understand all these details. We don’t even know when prices rise or fall. I went to the Upazila the other day, and they told me I’d get between Tk 80,000 and 90,000 per bhori if I pawned it.”

DEMAND AND IMPORT MISMATCH

According to BAJUS, Bangladesh has an annual demand for 18 to 20 tons of new gold. However, based on the Gold Policy of 2018, the yearly demand is estimated to be even higher, between 18 and 36 tons.

Import data reveals that in 2022, at least 54 tons of gold legally entered the country. However, global market instability has also impacted gold imports. With high prices, fluctuating dollar exchange rates, and pressures on Bangladesh’s reserves, imports have declined.

According to the Bangladesh Bank, while $ 4.16 million worth of gold was imported in the fiscal year 2021-22, this amount dropped to only $ 670,000 in the fiscal year 2022-23, an almost 84 percent decrease in a single year.

This data primarily reflects institutional imports. Businesspeople cite high customs duties and taxes as reasons for the reduction in institutional imports.

According to passenger (non-tourist) baggage regulations, individuals can bring in a certain amount of gold with lower customs duties, and gold brought in without duty is not recorded by customs authorities.

The National Board of Revenue, or NBR, also reports a decline in institutional imports.

Its data shows that Bangladesh Bank licensed 19 institutions as gold import dealers. However, from 2020 to June 2023, only seven institutions imported gold bars, spending around $ 8.2 million to bring in 139.64 kg of gold. Despite being licensed, 12 institutions did not import any gold.

IS IMPORT DUTY REALLY HIGH

Bangladesh imposes a 5 percent duty on the type of gold it primarily imports. In India, however, there is no duty on this.

The import duty is calculated based on the value of the gold. As global gold prices rise, the duty amount increases proportionally.

For instance, importing one bhori (approximately 11.664 grams) of gold valued at Tk 100,000 incurs a duty of Tk 5,000. In contrast, under the baggage rules, a fixed duty of Tk 4,000 per bhori is applied.

To keep the duty and taxes within Tk 4,000 at the 5 percent rate, the institutional import price of gold would need to be Tk 80,000 per bhori. If the price exceeds this, the duty under the baggage rules becomes more favourable, as it is a fixed amount rather than a percentage.

There are provisions for importing other forms of gold, such as coins. However, due to higher duties, these are less commonly imported by businesses.

Apart from this, there is an option to import gold in other forms, such as coins; but due to higher duties, these are less commonly imported by traders.

For instance, importing coins that are not used in legal tender coins (excluding gold coins) carries a total duty of 58.60 percent, whereas in India, the duty is 10 percent per kg.

For legal tender gold coins, Bangladesh imposes a total duty of 31 percent, while India maintains a 10 percent duty per kg.