August 27, 2023 (MLN): Domestic bullion maintained its bullish momentum this week, mainly driven by the continuous depreciation of the Pakistani rupee (PKR).
24-karat gold closed the week at a rate of Rs234,500 per tola, marking a weekly surge of Rs8,700 per tola, or 3.84%.
On a month-to-date basis, the metal has witnessed an increase of 5.54% or Rs12,300 per tola.
PKR plunge
The Pakistani rupee (PKR) continued its descent against the greenback and plunged below the psychological level of 300 this week.
Domestic currency experienced a total loss of Rs5.22 or 1.74% WoW against the USD in the interbank session, as it closed the week at 301.003 per USD.
It is worth noting that the depreciation of the local unit from 200 to 300 level against the USD occurred within a 15-month time span.
The reason for the continuous pressure on the local unit can be attributed to the IMF's demand for a market-determined exchange rate to absorb external pressures.
Subsequently, the government's ability to control the rupee through trade restrictions has been limited and the removal of restrictions on letters of credit (LCs) has led to an increased demand for dollars.
Since gold is denominated in U.S. dollars when the PKR depreciates against the U.S. dollar, the value of PKR-denominated gold rises.
Political uncertainty
Gold prices were further supported by political uncertainty surrounding the general elections, which led to turbulence in local markets.
Consequently, investors may have leaned towards safe-haven assets like gold to hedge their risks in an environment of deteriorating economic conditions.
Pakistan Stock Market
The market sentiment remained skewed towards bearishness with the benchmark KSE-100 index witnessing a consecutive three-week decline and currently stands at 47,671.22 points.
In the current week, the index lost 547.28 points or 1.14% WoW.
Perhaps, investors' attention was diverted towards risk-off assets rather than risk-on assets.
International markets
The rise in international prices also boosted the appreciation in the domestic market.
On the global front, international spot gold ended the week with a 1.32% increase at $1,914.43, with a weekly high of $1,923.4.
International gold daily time-frame chart
The increase in the respective commodity prices in the international market followed three consecutive weeks of decline.
Similarly, international spot silver soared by 6.45% to close the week at $24.22.
Copyright Mettis Link News
Posted on: 2023-08-27T13:38:43+05:00
