Gold glitters again as record high inflation boosts demand

September 02, 2022: Gold prices rose on Thursday as skyrocketing inflation dulled risk appetite and boosted demand for the safe-haven metal, although an advancing Pakistani rupee (PKR) limited bullion’s gains.

Data released by All Sindh Sarafa Association showed that the gold price in Pakistan surged by Rs2,000 per tola and Rs1,715 per 10 grams to settle at Rs141,000 and Rs120,885.

A surge of over 1.43% per tola snapped the four-day losing streak of the yellow metal during which the price of gold declined by Rs8,100 in the local market.

Record high Pakistan’s consumer price index-bases inflation surged to a multi-decade high of 27.3% in August which pushed the gold price to a one-and-a-half-year-high.

The safe-haven asset reversed its downtrend today as multi-year high inflation data boosted the appeal of the asset; however, the appreciation of the Pakistani rupee was pulling at the heels of the gold market and limiting its upside.

Gold is traditionally seen as an inflation hedge. However, reduced central bank interest rate hikes tend to push government bond yields up, translating into a higher opportunity cost for holding gold that pays no interest.

In the international market, the price of yellow metal plunged by $13 per ounce to settle at $1,702. Gold prices briefly slid below the key $1,700 psychological level for the first time in six weeks, as major central banks stuck to an aggressive stance to combat inflation, dulling demand for non-yielding bullion.

Meanwhile, silver prices in the domestic market plummeted by Rs50 per tola and Rs42.87 per 10 grams to settle at Rs1,470 per tola and Rs1,260.28 per 10 grams today.

APP