Gold price surges 4.29pc to all-time high on global uncertainty

KARACHI: Gold rallied 4.29 percent to a new high above Rs123,800 per tola and Rs106,138 per 10 grams in the local market on Monday, tracking global markets which saw investors rushed into the safe-haven commodity on concerns about heightened China-US tensions.

The metal jumped to an all-time high, hitting $1,943/ounce in the global trade, as US-China relations soured, and global coronavirus cases continued rising fading the hopes of an early recovery, while commodity analysts expect that gold prices could easily hit $2,000 an ounce before this current rally is over. To recall, gold reached the record high $1,921/ounce in September 2011.

All Sindh Saraf Jewellers Association said gold prices in the local market were all-time high, but were still Rs2,000/tola lower than the rates in Dubai market. Alpha Beta Core CEO Khurram Schehzad said gold rallied strong “mostly due to excessive liquidity in financial markets as well as fear of late economic recovery amid second wave of Covid-19”. The market has seen significant bullish momentum in the last few months as the global economy has been turned upside down because of the COVID-19 pandemic. According to some analysts, rising geopolitical tensions between China and the U.S. are adding further fuel to the rally. “However, one should stay cautious in gold now after posting strong returns,” Khurram added. Analyst Ahsan Mehanti at Arif Habib Corp said gold prices are rising only due to higher international prices as well as worsening rupee-dollar parity.

“There is very little gold trading activity in the country. This is a pandemic season and not a wedding season. Rupee has been depreciating and it is reflected in the high commodity prices.”

Mehanti negated the impression that higher gold prices would attract investments from other avenues. “Equity market is outperforming other asset classes and interest rates are low, under such a scenario investments go to equities and real estate, not gold.” Dealers said gold trade has been highly depressed since lockdown started from the second week of March. Closure of wedding ceremonies at banquets and halls from March gave a big dent to gold jewelry sales.

In May, gold imports remained nil as compared to 3kg worth $170,000 in April, according to the Pakistan Bureau of Statistics. Meanwhile, import of yellow metal in 11MFY20 stood at 275kgs, valuing $11.6 million versus 299kgs costing $11.8 million in the same period last fiscal year. Similarly, exports of jewelry in May were also zero as compared to $4,000 in April. Total jewelry sales to foreign markets in July-May FY20 stood at $3.2 million, down 32 percent over $4.7 million in the same period previous year. Going forward, analysts believe the metal price to continue the bullish momentum. “The gold price has hit an all-time high and is now eying $2,000/oz as the world contends with a growing number of coronavirus cases and ballooning government debt worldwide, causing demand from physically backed exchange traded funds to soar,” S&P Global said in a report.