Gold bugs contra price manipulation, in the UAE

17 November 2008 by Mike Gogulski
Posted in economics | 5 Comments »

This is fascinating, from

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.
Dubai, UAE
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?

  1. 5 Responses to “Gold bugs contra price manipulation, in the UAE”

  2. By Vache Folle on 17 November 2008

    Gold gougers?

  3. By Patrick on 17 November 2008

    Yes, if something is your property, you are free to trade it for something else which you are willing to accept. Or not trade it at all.

    Therefore all price controls are immoral.

  4. By Black Bloke on 20 November 2008

    What’s even more interesting than this continued quest for a just price, is the substantiated report of the difficulty of purchasing gold in other places in the world. Silver’s price has reached incredible new lows but over at the US Mint, no one can get their hands on it, even at the stupidly ballooned prices that the feds are currently overcharging.

    I’d like to see what the effect on mining is in the next year or so.

    I assume that everyone who reads here knows the classic supply/demand/price stuff. I think that stating that is enough to explain my curiosities.

  5. By Mike Gogulski on 20 November 2008

    Black Bloke: Hi! Indeed you are right. I have been reading stories for months now about people paying premia of up to 40% over the “market” spot price that gold trades at on the metals exchanges, which far exceeds the usual premia imposed for retail coin and bar sales. Big fun awaits the west of Asia ends up holding most of the world’s gold as well as a huge chunk of rapidly depreciating fiat debt instruments.

    Patrick: Right on!

  6. By Black Bloke on 20 November 2008

    I’m going to try and contact a mint near me, and see if anyone’s willing to either comment or sell me some.

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