Sunday May 28, 2023

Gold rate rises in Pakistan

Investors' attention shifts towards gold due to rupee's steep fall against US dollar

March 01, 2023
An undated image of gold sets displayed at a jewellery store. — AFP/File
An undated image of gold sets displayed at a jewellery store. — AFP/File

Gold price in Pakistan extended gains on Wednesday as the rate surged over 1% due to a massive plunge in the rupee value against the US dollar.

According to the data released by the All-Pakistan Sarafa Gems and Jewellers Association (APSGJA), the price of gold (24 carats) declined by Rs2,700 per tola and Rs2,315 per 10 grams to settle at Rs197,100 and Rs168,981, respectively.

Cumulatively, the precious commodity gained Rs3,000 per tola in the last two sessions reversing the prevailing trend recorded last week — when gold lost Rs1,900 per tola.

Analysts say gold may be an effective way to defend investments against inflation, but only over long periods of time.

Comparatively, over shorter periods of time, the inflation-adjusted price of gold swings wildly, making it not a very strong near-term hedge for inflation.

Meanwhile, silver prices in the domestic market remained unchanged at Rs2,080 per tola and Rs1,783.26 per 10 grams, respectively.

In the international market, gold gained traction as strong Chinese economic data dented the dollar and drove some bets for better physical demand from the top bullion consumer, but the risk of elevated US interest rates capped gains.

The per ounce price of gold in the international bullion market rose by $27 to settle at $1,837.

“The market is cautiously optimistic for a Chinese economic recovery following strong data which has put the dollar rally into reverse,” independent analyst Ross Norman said, adding that it was, in turn, boosting gold and risk-on assets.

Physical gold demand in the key hub has already picked up this year as COVID-19 restrictions were eased.

“Gold was clearly oversold and we’re seeing good bargain hunting on the lows, having found technical support at the $1,808 level ... the market looks poised to firm but cautiously so, with US inflation-linked data being a constant driver,” Norman added.

Although traditionally considered an inflation hedge, higher interest rates to rein in consumer prices dim the appetite for bullion since it pays no interest.

Gold registered its worst month since June 2021 in February after a slew of US data pointed to a resilient economy and a tight labour market, sparking fears that the Federal Reserve would deliver more rate hikes to curb inflation.