Price of gold (24 carats) plunged by Rs9,000 per tola and Rs7,716 per 10 grams
As the rupee slightly recovered against the US dollar, gold price in Pakistan on Tuesday registered its highest single-day drop.
Investors also kept a close watch on the US Federal Reserve's interest rate hike decision and policy outlook.
The price of gold (24 carats) plunged by Rs9,000 per tola and Rs7,716 per 10 grams to settle at Rs201,500 and Rs172,754, respectively, data released by the All-Pakistan Sarafa Gems and Jewellers Association (APSGJA) showed.
The jewellers' body also said that local gold was “overcost” by Rs2,500 per tola in Pakistan compared to the Dubai bullion market.
The plunge in the gold rate comes as the demand dropped after the investors seemingly ditched the safe-heaven metal and opted for the greenback — which is now available in the open market after the dollar cap's removal.
The Pakistani rupee started showing signs of recovery today as it gained nearly Rs2 against the dollar to close at Rs267.89 after the developments surrounding talks with the International Monetary Fund (IMF) unfolded.
Investors were, however, purchasing only gold bars, not jewellery, which had not only reduced goldsmiths' profit margins but the labour force was also at the stake of losing jobs, as jewellery makers were moving towards other professions in absence of work.
Spot gold dropped $22 to $1,902 per ounce, its lowest level since January 19 in the international market. However, bullion has gained 4.3% so far in January, putting it on course for a third straight monthly rise.
"Gold prices are feeling the squeeze caused by a strengthening dollar as a build-up of expectations, ahead of this Wednesday's Fed rate decision and policy statement,"ActivTrades,senior analyst at Ricardo Evangelista, said.
Meanwhile, silver prices in the domestic market decreased by Rs50 per tola and Rs42.88 per 10 grams to settle at Rs2,250 and Rs1,929, respectively.