September 14, 2023

Gold Prices Surge as Rupee Downtrend Continues

On Monday, gold prices continued to climb in Pakistan due to concerns over the country’s external financing and the delay in the revival of the International Monetary Fund (IMF) programme. The rupee resumed its downtrend, losing Re0.84, or 0.30%, against the US dollar in the interbank market. This pushed the price of gold in the local bullion market upwards, with the price of gold (24 carats) increasing by Rs500 per tola and Rs428 per 10 grams to settle at Rs199,200 and Rs170,782, according to data released by All-Pakistan Sarafa Gems and Jewellers Association (APSGJA).

Despite shedding Rs1,300 per tola during the last week, gold remains a safe haven asset able to benefit from market uncertainty. The movement of the Pakistani currency remains volatile, with the yellow metal only registering gains twice.

Silver prices in the domestic market remained unchanged at Rs2,120 per tola and Rs1,817.55 per 10 grams, respectively.

In the international market, gold raced towards the key $1,900 level, emboldened by bets that the Federal Reserve may now have to tone down its rate hikes as investors sought cover from uncertainty triggered by the collapse of Silicon Valley Bank. The per ounce of gold settled at $1,886 after an increase of $20.

Market participants pricing out rate hike expectations are lifting gold, said UBS analyst Giovanni Staunovo. Lower interest rates decrease the opportunity cost of holding zero-yield gold. Gold gaining suggests that some institutional money came into the market. However, whether this trend will continue in exchange-traded funds (ETFs) is uncertain, according to Philip Newman at consultants Metals Focus.

The yellow metal found further tailwinds from the simultaneous retreat in the dollar index, making bullion cheaper for overseas buyers.

In summary, the price of gold in Pakistan surged as the rupee continued its downtrend, driven by concerns over external financing and the IMF programme’s delay. Gold remains a safe haven asset and gained further momentum from market uncertainty and the retreat in the dollar index.

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