Dubai gold traders caught by falling prices are trying to manipulate the market to gain higher prices.
Many bought their gold when prices were higher and now find they would have to sell at a loss if they followed the market.
Instead they are refusing to sell and have upped manufacturing and handling charges to try to compensate for their lack of judgment.
Many are also refusing to sell low and are keeping their stocks in the hope that gold prices will rise again and leave them with a profit.
Gold prices have followed a steady downward trend in 2013.
Prices down 30%
Today’s price is US$1,250 an ounce – compared to a 52 week low of $1,211 and a high of $1,794.
Customers in Dubai who are seeking gold bars now should pay around $550 an ounce less than when the market peaked, but are facing a flat refusal to sell from the traders who have seen prices plunge by around a third.
Dubai Gold and Jewellery Group explained the supply of Swiss gold bars has almost dried up and some traders had doubled their charges to counter the price shortfall.
The Dubai Economic Development Department monitors gold sales in the emirate.
“We are ready to investigate any complaints from consumers, but we are not pointing a finger at specific traders and accusing them of exploitation or refraining from selling,” said a spokesman.
“There’s no doubt high demand has caused this problem.
“It’s also difficult to judge whether fees are excessive because we need to examine what the real costs are. The best solution is for more traders to enter the market so competition forces traders to adjust their prices.”
Problems for dealers
Market commentators suggest the recent $20 rise in gold was triggered by safe haven buying as a result of the conflict in Egypt.
Many feel the global market has adjusted what was considered an overvalued commodity back to somewhere near the right price.
Deutsche Bank is among the leading financial institutions cutting the gold forecast for this year and next.
Analysts foresee a price of around $1,430 an ounce by the end of 2013 and further falls to $1,338 next year.
The problem for traders is building a stock of gold while the price is falling is a foolhardy option, so buyers in Dubai and beyond could see dealers sitting on their supplies waiting for prices to rise and releasing a trickle to sustain demand and cashflow.
