Posted in economics | 5 Comments »
This is fascinating, from Gulfnews.com:
A buyer who asked not to be named said: “The price of gold prompted me to visit the Gold Souq in Sharjah. However, most retailers claimed they were sold out. Outlets where gold was available were openly overcharging. They said it was in short supply. The price of 24 carat stood at Dh88.75 but they were openly charging Dh92.50. This is clearly an unfair practice.”
Overcharging? What, pray, ought the penalty be for this heinous crime of charging more than someone would care to pay for a substance like gold, which all of us need to eat and to breathe?
At least Erik — who is clearly not from ’round these parts — gets it mostly right in the comments:
Anyone that thinks it is “unfair” to charge a certain price for gold is misinformed. If you own gold, you should be able to sell it to another person at any rate you choose because it is your gold. I can sell my car at any price I choose, and you’re welcome to purchase it or not. The real “market rate” for gold is simply an average of what people are paying, so if one dealer is selling above that average price then you, as a customer, are welcome to not shop there. This is called an open and free market.
Posted: October 28, 2008, 09:33
The whole truth, actually, is that there is no such thing as a “market rate” at all. There is only the information which emerges from the knowledge that certain transactions did or did not take place at certain price levels. Averaging doesn’t apply. If it did, over what interval would you take the average? Would last week’s pricing data prior to the 30% spike in market valuation be given equal weight to yesterday’s sustained trades at the new price level but at 10x the volume? At what point would this magic line be drawn, the other side of which was unfair territory?