Gold prices in Pakistan track global spike to six-month high

KARACHI: Local gold market soared to a six-month high this week, tracking the rising global trend in the precious metal which hit an all time high on hopes of a cut in the US interest rates, dealers said.

The 24-karat gold, the main benchmark for the domestic market, jumped almost 4.5 percent to Rs230,200 per tola, or 11.66 grams, the highest level since September 2023, according to data from the All Sindh Saraf and Jewellers Association.

The gold gained almost Rs10,000 per tola this week. The 10-gram 24-karat gold and 22-karat gold also gained Rs8,488 and Rs7,781 week-on-week, to settle at Rs197,360 and Rs180,913, respectively.

Analysts said the rally extended a two-week surge, as gold prices in Pakistan tracked the gains in the international spot market, where the precious metal hit an all-time high of $2,185.19 per ounce on Friday. The surge was driven by a weaker dollar, a rise in the US unemployment rate and a moderation in wage gains.

Traders boosted bets that the Fed could start cutting interest rates in May to around 30 percent after the latest US economic data.

"The domestic gold market is mainly influenced by the international rates, which have been on a bullish trend due to the global economic slowdown and prospects of a cut in the US interest rate," said an analyst at a local brokerage house. "Investors are looking for a safe asset to hedge against inflation and currency depreciation."

Prices in the local market are adjusted by a premium of $20 against rates in the international market.

Dealers said the rupee appreciated about 0.3 percent against the dollar this week, however, the currency's strength was not enough to dampen the demand for gold, which is denominated in dollars.

"The rally in the international rates was significant enough to offset the impact of a relatively strengthened domestic unit," the analyst said.

"Gold is still attractive for local investors, as the rupee is expected to depreciate in the long term due to the country's large current account deficit and external debt obligations."

The price of 24-karat silver, however, remained unchanged at Rs2,600 per tola this week, as the industrial demand for the metal remained subdued.

Analysts said gold's appeal as a safe haven was also boosted by the uncertainty over the global growth outlook, as the UK and the Eurozone struggled to recover from the recession, while China faced challenges in its economic transition.

The UK economy contracted by 1.5 percent in the fourth quarter of 2023, marking the second consecutive quarter of negative growth. The Eurozone economy also stagnated in the same period. China, the world's second-largest economy, set a modest growth target of 5 percent for 2024.

"Gold is likely to remain in high demand in the coming months, as the global economic recovery remains fragile and uneven," the analyst said. "The geopolitical tensions in the Middle East could also add to the volatility and uncertainty in the markets."