Jewellers in Bangladesh have hiked the price of gold to a historic high in line with rising pure gold prices and growth in the global market, according to industry people.

Also, pure gold prices increase every time there is a supply crisis compared to demand.

As such, the price of 22-carat gold rose to Tk 124,501 per bhori (11.664 grams)effective yesterday, according to a press release from the Bangladesh Jewellers Association (Bajus).

The trade body's standing committee on pricing and price monitoring took this decision as the price of pure gold increased in the local market, said a Bajus official.

Bajus Vice-President Reponul Hasan, also the owner of Jewellery House, informed that gold jewellery sales have increased significantly over the past three days.

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Gold now Tk 122,985 a bhori, a historic high

"This sudden spike in demand will create a kind of volatility in the domestic market," he said.

At present, about 80 percent of the demand is still met by smuggled gold, according to industry people.

On August 18, Bajus hiked the price of gold to Tk 122,985 per bhori. Bangladesh saw the price of gold rise to Tk 100,000 per bhori for the first time on July 20, 2023.

Global gold prices eased on Monday, but hovered around the historic $2,500 level as traders locked in profits following bullion's climb to an all-time peak in the previous session on expectations of a US interest rate cut next month, according to a Reuters report.

Spot gold was down 0.2 percent at $2,503.10 per ounce as of 0724 GMT, and US gold futures edged 0.2 percent higher to $2,541.50, it said.

Enthusiasm over a likely interest rate cut by the US Federal Reserve in September propelled bullion to an all-time high of $2,509.65 last Friday. This coupled with increased geopolitical tensions and robust central bank-buying have sent bullion over 20 percent higher so far this year, it added.

"Gold has been chasing the psychological $2,500 level for several months, and now that it has been reached, we are seeing some natural profit-taking occur," said Tim Waterer, chief market analyst at KCM Trade.

Gold's practical uses are limited mainly to jewellery and some electronics, and it does not offer anything in the way of returns except the possibility of future price rises.

However, it is viewed by investors as a safe haven during turbulent economic and geopolitical times.

A reaction to the war in Ukraine and the conflict in Gaza appears to have been a factor behind the increase in its value over the past two years, even as US interest rates rose from historic lows to the highest in 23 years, according to a report by The Guardian.

Gold prices have risen by two-thirds since the end of 2019. However, much of that gain has come since the start of March this year, it said.

On condition of anonymity, a local jewellery trader said illegal gold imports have not slowed.

However, local sellers must set the price in line with the international market, which is another reason for the increase in prices, he added.

The annual demand for gold in Bangladesh currently stands between 20 to 40 tonnes.