Gold prices in the local market had climbed close to Tk 300,000 per bhori. Amid the turbulence of the four-week Middle East war, that price has dropped below Tk 250,000.
There are indications that prices may fall further, as gold prices in the global market have declined significantly in recent days, with forecasts suggesting a continued downward trend.
Last Thursday, the jewellers’ association reduced gold prices twice by Tk 15,338 per bhori. On that day, the global price of gold was $4,732 per ounce (31.1034768 grams). Although it dropped below $4,500 the following day, prices were not adjusted locally due to the Eid holidays.
At around 1:00 pm on Monday, while this report was being written, the global gold price had fallen by $270 per ounce to $4,152—the lowest since 11 December. This means that over four days since last Friday, gold prices dropped by $580 per ounce.
Based on exchange rates alone, the price of 22-carat gold per bhori should decrease by Tk 23,000–24,000. However, prices began to rise again in the global market afterward.
Despite the global decline, the Bangladesh Jewellers Association has not yet adjusted prices. When asked, the chairman of its price determination committee, Dewan Aminul Islam, told Prothom Alo that due to the Eid holidays, prices were not being adjusted.
He added that adjustments would be made later in the week and that if global prices continue to decline, local prices will also fall, as both business and consumer interests are considered.
Will global prices fall further?
Gold prices in the global market have remained volatile for a long time. Typically, gold prices rise during economic and political instability. However, despite the uncertainty caused by the war involving Iran, Israel, and the United States since 28 February, gold prices have not surged and have instead remained relatively stable. Toward the end of last week, however, prices began to decline.
Tensions in the Middle East have intensified further this week. US President Donald Trump wrote in a Truth Social post that if Iran does not reopen the Strait of Hormuz within 48 hours, the United States will strike its power facilities. In response, Iran warned of retaliatory attacks on energy infrastructure linked to the US and Israel across the Middle East.
According to a Reuters report, investors have become concerned about potential attacks on energy installations between the US and Iran. Asian stock markets have fallen, while crude oil prices have risen above $110 per barrel.
Rising oil prices are contributing to inflationary pressure. Typically, higher inflation increases demand for gold as a safe investment. However, higher interest rates reduce demand for gold since it is a non-interest-bearing asset. The strong likelihood that the US Federal Reserve may raise interest rates this year has contributed to a significant drop in gold prices.
Tim Waterer, chief market analyst at international online trading and brokerage firm KCM Trade, told Reuters that the conflict involving Iran has entered its fourth week. With oil prices hovering around $100, market expectations have shifted toward possible interest rate hikes rather than cuts, reducing gold’s appeal as a non-yielding asset.
He also noted that gold’s high liquidity has become a challenge in this risky environment. Due to falling stock markets, investors are selling gold to meet margin calls on other investments. A margin call occurs when investors who have purchased assets with borrowed funds face losses and are required by brokers to deposit additional money.
Amid global geopolitical tensions, increased gold purchases by central banks, and investors seeking safe-haven assets, gold prices have been on an upward trend for a long time. In January, spot gold prices reached nearly $5,600 per ounce.
In the London Bullion Market Association’s annual forecast survey in January, analysts predicted that gold prices could reach as high as $7,150 per ounce this year, with an average price of $4,742.
Last week, economist James Meadway told Al Jazeera that two factors are crucial for major changes in gold prices: first, whether the Federal Reserve clearly signals interest rate cuts despite inflationary pressure; and second, changes in expectations about the duration of the war.
Is it profitable to invest?
Changes in global gold prices affect the domestic market. Although global prices are currently declining, local prices have not yet been adjusted due to the Eid holidays.
However, if the downward trend continues this week, local prices are likely to fall, making gold a profitable investment, according to two jewellery traders.
On condition of anonymity, the traders said that if the war prolongs and damages increase, gold could again become attractive to investors. In that case, prices may exceed $5,000 per ounce and could even reach $6,000 by the end of the year. However, there is always uncertainty in gold price shifts, which must be considered.
In January last year, the price of 22-carat gold in Bangladesh was around Tk 140,000 per bhori. At the beginning of this year, it rose to Tk 222,000. On 29 January, it climbed further to Tk 286,000. Currently, it is being sold at Tk 246,926 per bhori. This means that despite fluctuations, the value of gold purchased one year and three months ago has increased by Tk 100,000 per bhori.
Dewan Aminul Islam said that given the current price drop due to the war, it can certainly be considered an excellent time to invest in gold. Even if confidence in global currencies declines, gold remains unmatched as a medium of exchange. It has also proven to be a safe investment. Various global institutions predict that once the instability caused by the war subsides, gold prices will rise again.