As more and more consumers are realising that the gold rates quoted by the neighbouring jeweller shop is far higher than the official quotes, the authorities have launched a major investigation into the bullion trade for what has been alleged to be unfair trade practices in fixing prices. The blatant difference in rates quoted by newspapers and being charged by gold dealers has forced the Monopolies and Restrictive Trade Practices Commission (MRTPC) to question the gold and silver prices in the market.

The MRTP Commission has already sent a notice to the Bombay Bullion Association, ordering that they should stop issuing gold and silver prices to newspapers since these have little relation to the actualprices. While newspapers carry one rate for the precious metals, jewellery shops quote a higher rate, mostly five to eight per cent higher than what newspapers quote. Even there is no uniformity in prices and different dealers and jewellers are charging different rates.

Says M L Damani, president of the Bombay Bullion Association (BBA), ``the MRTPC investigation is because of some misunderstanding. Dealers do both buying and selling. Obviously they want a margin for the deals.'' Another gold dealer also defended the current pricing, saying that ``We want this five per cent spread to remain in the business.''

The current practice of the BBA to fix the gold/silver prices has also come under fire. The association calls for quotations from its panel and takes an average rate for the day. These prices are systematically different from the sales/purchases of MMTC which is the country's largest trader in bullion. In short, unlike prices of other things, gold prices are not based on demand andsupply.

Interestingly, the prices quoted by the Association and the trades made by the panelists on particular dates, even these show differences. While the gold price quoted for Friday was Rs 4,025, a South Mumbai jeweller has quoted a rate of Rs 4,225 for 10 grams of 22 carat gold, a difference of Rs 200. ``There is so much difference between the official rate of BBA and that of jewellers. This doesn't make sense,'' said an investor in gold.

If this is the case, buyers ask, what is the point in BBA announcing the rates religiously every day. This system has already confused the buyers who have stopped looking at daily quotations. This has given rise suspicion that it's not overseas rates or domestic supply-demand situation which is influencing the gold/silver prices, but dealers themselves.

Worse, MRTPC investigations have revealed that of the total of 11 common panel members for gold and silver, two members are not dealing in gold and silver. Another panelist is found to be only a commission agent.Due to high demand of gold in the country, the dealers are not passing on the benefits of lower international prices to the consumers. Despite gold prices falling continuously in the last two years, the average price paid by an Indian consumer is much higher.

India, according to the World Gold Council (WGC), is the largest consumer of the yellow metal with its 1998 consumption touching a record high of 700 tonnes. Gold analysts say that hoarding of gold for speculative purpose has gone down considerably as gold prices have been linked to the international prices. The international prices are applicable only to the bulk gold purchasers who want gold in non-jewellery forms. The small consumers, meanwhile, have to solely depend on jewellers at a higher price than the officials quotes -- for which quality is also not guaranteed.