Import of gold from Dubai came to a halt as prices go lower by Rs 250 per 10 gram

By Syed M. Aslam
Oct 18 - 24, 1999

The international volatility took its toll on the Karachi Sarafa (bullion) market which remained closed for almost two weeks till October 8.

Talking to PAGE, the secretary of Karachi Saraf and Jewellers Group, Haji Muhmmad Farooq said that at present gold imports from Dubai has stopped altogether as gold price in Karachi is cheaper by Rs 250 per tola (11.54 grams). Today the gold is traded at Rs 6,400/tola in Karachi a compared to Rs 6,650 per tola in Dubai, he told PAGE on Saturday October 16.

Who would like to import gold at Rs 6,650 per tola when it is already available at a price less by Rs 250 in Karachi, he asked.

The international price of gold has remained much volatile since the beginning of last month and continues till this week. Gold traded narrowly between $254-255 per ounce in New York on September 6. It jumped to $ 321.50 on the afternoon on Friday, October 8 near to two-year high of $ 340 per ounce on October 5, before falling back to $ 325.50 per ounce the same afternoon.

The volatility in the international gold prices spilled over to the Karachi bullion market which has witnessed a roller-coaster ride. The prices kept on changing for days, resulting in abrupt turnaround.

When trading resumed at the Karachi bullion market after a closure of almost two weeks on October 8 the gold was quoted at Rs 5,298 per ten grams. This was Rs 566 more than the price last quoted on September 25 when it was Rs 4,732 per 10 gram.

Gold prices once again surged by Rs 111 per 10 gram in the Karachi bullion market when the market opened on Thursday after the closure on Wednesday October 13, the day after the Nawaz Sharif government was dismissed by the army. 24-karat gold was quoted at Rs 5,555 per 10 gram on October 14 as compared to Rs 5,444 on Tuesday.

As the international prices on October 14 rose to $ 323 per ounce suspending all gold imports from Dubai into the country. On Friday October 15 gold was traded at Rs 5,504 per 10 gram in Karachi which went down by Rs 18 to Rs 5,486 per 10 gram on Saturday, a bullion dealer told PAGE.

Commenting on the ongoing crisis in the local bullion market a dealer said that the local market has not fully absorbed the pinch of boom in the international prices as it currently lacks presence of buyers.

International Gold Market commentary

For the Week from Monday September 6 to Friday Sept. 10

New York: With the market closed for the Labour Day Holiday, trading activity remained subdued on Monday. Gold traded narrowly between $ 254-255 an ounce.

Media reports based on leaked information about an alternative to open market gold sales as the mechanism for financing the IMF’s contribution to debt relief caused a flurry of activities and lifted prices above $ 256/ounce on Tuesday.

On Wednesday the quotations edged up to $ 256.40/ounce. They touched $ 257 on Thursday primarily due to a weakening dollar and the endorsement of IMF plan by two influential US legislators. The prices thinned on Friday and gold drifted back to $ 256/ounce before closing at $256.30/ounce.

Middle East and Asia: Physical demand for gold in the Middle East and Asia continues to increase, improving both the economic recovery and low international prices. In Dubai, gold imports in July totaled 31.34 tonnes, up from 24.38 tonnes a year earlier. Taiwan’s gold imports more than doubled in August to 9.03 tonnes as compared to the previous year. Gold imports through India’s western city of Ahmedabad rose sharply to 25.27 tonnes in August from 13.88 tonnes during the comparative period last year.

For the Week from Monday October 4 to Friday October 8

This was another volatile week for gold. International dealings spread between $2-3 reflecting the high degree of nervousness among market players and the high levels of price volatility.

Gold started the week higher at $ 311.75/ounce and edged steadily higher throughout the day. The price rise gained renewed momentum during Asian trading hours as both short-covering from Australia and fund buying increased. The buying continued in Europe on Tuesday and after fixing at $326.25/ounce in the morning, the quotations rose up to a two-year high of $ 340/ounce before falling back to profit taking to $ 325.50/ounce in the afternoon.

Gold ranged above $325/ounce on Wednesday morning then slipped back after the US opening to an afternoon fixing of $ 318.25. It bounced back to $ 323 level later in the day.

Similar moves were seen on Thursday and the view that gold was beginning to consolidate between $315-325 gained some acceptance.

On Friday support near the $ 315 level was tested and quotations subsequently went up to $325/ounce before closing at $ 319.50-321.50 in New York.

Canada’s finance department announced that the central bank sold 136,000 ounces (4.2 tonnes) of gold during September as part of its long-standing sales programme, reducing the country’s gold holdings to 1.8 million ounces (56 tonnes).

Source: World Gold Council