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Gold market in Pakistan hits rough patch as gains go up in smoke

Gold market in Pakistan hits rough patch as gains go up in smoke
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May 26, 2024 (MLN): Pakistan's bullion market witnessed major suffering this week, with gains from the past week getting completely erased due to plunging international rates.

The key benchmark, 24-karat gold fell by over 2% or Rs8,100 to settle the week at Rs240,000 per tola.

The Karachi Sarafa Association reported that the price of 24-karat gold also dropped to Rs205,761 per 10-gram, down Rs6,945 WoW.

Similarly, the price of 22-karat gold was quoted lower this week at Rs188,615 per 10-gram.

Silver prices also declined in the domestic market, with 24-karat silver being sold at Rs2,800 per tola and Rs2,400.54 per 10-gram in the last trading session of the week.

Gold rates were on the spike due to a massive rally in the international market. This prompted gold dealers to underprice the yellow metal by Rs4,000 due to a significant reduction in purchasing power.

However, rates are now being quoted based on the transparent international rate, incorporating the effect of changes in the exchange rate, due to the massive drop this week.

On the global front, international spot gold dropped by 3.44% or around $81 per ounce, marking the highest weekly drop since September 2023.

The Federal Reserve's most recent minutes of the meeting hinted officials would keep interest rates higher for longer as they struggle to bring inflation down to the 2% target.

This turned out to be bearish for the yellow metal, as in an environment of higher interest rates, gold loses its attractiveness due to the rising opportunity cost of holding it.

The downturn in demand was further evident after the latest data revealed that bullion imports by China, the world’s biggest consumer began to buckle in the face of record prices.

Overseas purchases of physical gold also fell to 136 tons in April, a 30% decline from the previous month and the lowest total for the year.

In the local market, gold prices remain shielded on the currency front as the domestic currency continues to maintain its stable phase against the mighty Dollar.

The Pakistani rupee (PKR) experienced a fluctuating week but managed to close relatively flat at PKR 278.21 per USD.

Since gold is denominated in U.S. Dollar terms, when PKR appreciates against the greenback, the value of PKR-denominated gold falls.

However, the global slump weighed over the market and resulted in massive losses this week.

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Posted on: 2024-05-26T13:48:45+05:00