Why jewelers in Bangladesh glitter more than gold

The jewelry industry in Bangladesh has been flourishing unabated. Smaller shops are expanding in size. Fashionable new showrooms are being opened in posh shopping malls. Customers are being entertained lavishly in showrooms. This is happening in spite of the fact that the price of gold has been rising steadily. How is it possible?
If you ask a jeweler, he will tell you with a smile of satisfaction that some people in our country have plenty of money and they buy gold irrespective of its price. It is also said that some people are stockpiling gold as an investment because of the steady rise in price.
I am surprised to observe that the trading of gold in Bangladesh is guided by rules made by the jewelers themselves. The government has no control either on the quality of the ornaments or on the rules of the business. It is obvious that when the rules are made by the jewelers they always gain, no matter whether they buy or sell gold.
Most of the buyers of gold jewelry have no idea about the weights, quality or costing methods of the gold ornaments. As a result, the customers can be easily deceived. When I check the memos in jewelry shops, occasionally I detect "mistakes" which, unfortunately, always favour the shop owners.
Jewelry shops in Bangladesh now sell what they call KDM gold. This is different from old or sanatan gold. The term KDM is a misnomer. At one time, gold jewelry was soldered with cadmium, also called kadium in some places. Cadmium soldered jewelry was known as KDM gold. Use of cadmium has now been banned in most countries as the fume of molten cadmium is toxic and harmful to people engaged in jewelry making. Jewelers in most parts of the world, including Bangladesh, now use gold for soldering jewelry but still call it KDM gold.
The quality of gold is expressed in karat. 24 karat gold is the purest form of the metal available in the market. It is supposed to be 99.9% pure. This gold is relatively soft and easily malleable. 22 karat gold is less pure than 24 karat gold. The measure of 22 karat means that out of 24 parts, 22 parts are 99.9% pure and the remaining 2 parts are other metals or impurities mixed with it to make it harder. 22 karat gold is therefore 99.9x 22/24=91.575% pure. Similarly, 21 karat gold is 87.41% pure. One should not confuse karat with carat, which is a measure for precious stones and gems.
The trading of gold jewelry is regulated entirely by the Bangladesh Jewelers' Association formed by the owners of jewelry shops. They fix the price of gold and frame the rules of business. Neither the government nor the consumers have any say in this matter. They are very prompt in increasing the price of gold when it rises in the international market but very slow in decreasing the price when it falls. Why? It is advantageous to them.
If you exchange an old 22 karat KDM gold jewelry for a new one, the shop will deduct 10% from the value as loss if it was purchased from the same shop and 20% if purchased from any other shop. Had there been any control on quality, KDM gold would have the same quality no matter from where you buy it. The difference in the calculation losses indicates that there is no control in quality.
I exchanged old gold in Saudi Arabia, where the market is governed by state regulations. I exchanged 22 karat gold in Jeddah at the full market value without any deduction as losses, and paid only the making charge for the new ornament. If gold ornaments could be exchanged in Saudi Arabia without any deductions, why can't we do so in Bangladesh? The reduction in value due to the so-called loss is a net profit to the shop owner.
The situation is worse if we exchange old or sanatan gold. The price of 21 karat old gold is 35% less than the current price of KDM gold and, in addition, 10% is deducted as loss. This means we get 42% less price compared with the current KDM value. Why? The jeweler will argue that the old ornament has about 65% pure gold and 35% other metals as impurities. In other words, what we bought as 21 karat gold was, in fact, 14 karat gold! This means that we were cheated when we bought the old jewelry and now we are paying the price for it. Why should the customers be penalised for the unethical business done by the jewelers?
This explains why the jewelry shops in Bangladesh are thriving in spite of the rising price of gold. It is interesting to note that they are now spreading a news or rumour that they will soon stop buying old gold from customers. Some people are, therefore, rushing to sell old gold at a loss of more than 40%.
It is obvious that the customers in Bangladesh are being deceived by the jewelers in absence of any government regulations or control. Surprisingly, the Consumers Association of Bangladesh is also silent on this matter. Is it not time to stop this shady business and bring some discipline to gold trading through legislation in order to protect the interest of the consumers?
Such regulations should ensure that all jewelers must guarantee the quality of gold and they must buy back the same at the existing market price without any deductions, like in Saudi Arabia. The jewelers should also be obliged to buy back their old gold ornaments, sold as 21 or 22 karat gold, at the current market price of 21 or 22 karat gold without any deductions as they made undue profits by selling 14 karat gold at the price of 21 or 22 karat gold.

The writer is a former chief engineer of Bangladesh Atomic Energy Commission.