Unlike in world markets, gold loses shine in Pakistan
Weakening rupee should have made bullion expensive, but it became notably cheaper
Weakening rupee should have made bullion expensive, but it became notably cheaper. PHOTO: FILE
KARACHI:
Gold, which used to be a safe haven for investors, has lost its shine as it has maintained a downturn in Pakistan, contrary to the consolidation in world markets. The drop in the precious yellow metal came despite the decline in local currency, though slightly, against the US dollar and other major currencies of the world in the last two days (Thursday and Friday) in the inter-bank market.
The weakening rupee should have made the imported commodity, the bullion, slightly expensive, but to the contrary it became notably cheaper. With a fresh drop of Rs500 per tola (11.66 grams) on Saturday, the gold has lost a total of Rs2,000 (3.2%) to a threeweek low at Rs59,700 compared to the high of Rs61,700 per tola on Tuesday. Surprisingly, gold stood at $1,234 per ounce (33.10 grams) in the world market on both days (Tuesday and Saturday), according to the All Sindh Saraf and Jewellers Association.
“The local bullion market is running in total disconnect with the world market these days…that’s why there is price disparity in the two markets (local and international),” Association President Haji Haroon Chand said in comments to The Express Tribune. “Pakistan bullion market has become Rs2,500 per tola cheaper than Dubai one,” he said. “The undervalued gold offers golden buying opportunity these days, but unfortunately buyers have gone completely missing in the market,” he said.
Price of gold falls post-rupee appreciation
The situation may encourage gold smugglers to cash the opportunity, he said. “Lack of purchasing power is the only reason behind the gold being undervalued in Pakistan,” Chand said, adding the rupee devaluation of around 25% in the last 10 months has turned the businesses upside down. “I am sitting at my Tariq Road’s jewellery shop since morning and it is around six (on the clock) in the evening and not a single buyer has come,” he said.
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“I have not seen such a bad situation throughout my life,” the 70-year old Haji Haroon added. “The prolonged uncertainty about economic policies and undue pressure on businessmen and politicians have badly shaken the business confidence in the bullion market,” he said. According to details, half of the drop in gold price (Rs1,000) was seen the day the rupee made a notable recovery of 1.4% to Rs132.03 to the US dollar in the interbank market on Wednesday, following Saudi Arabia’s announcement of a $6-billion assistance package for Pakistan.
The remaining drop was recorded in the last three days (Thursday-Saturday) of the week when rupee lost Rs0.42 to Rs132.45 to the greenback cumulatively on Thursday and Friday in the interbank market. The international gold market has moved in a narrow band of $11 per ounce between $1,224 to Rs1,235 in the last two weeks, according to the association.
Gold, which used to be a safe haven for investors, has lost its shine as it has maintained a downturn in Pakistan, contrary to the consolidation in world markets. The drop in the precious yellow metal came despite the decline in local currency, though slightly, against the US dollar and other major currencies of the world in the last two days (Thursday and Friday) in the inter-bank market.
The weakening rupee should have made the imported commodity, the bullion, slightly expensive, but to the contrary it became notably cheaper. With a fresh drop of Rs500 per tola (11.66 grams) on Saturday, the gold has lost a total of Rs2,000 (3.2%) to a threeweek low at Rs59,700 compared to the high of Rs61,700 per tola on Tuesday. Surprisingly, gold stood at $1,234 per ounce (33.10 grams) in the world market on both days (Tuesday and Saturday), according to the All Sindh Saraf and Jewellers Association.
“The local bullion market is running in total disconnect with the world market these days…that’s why there is price disparity in the two markets (local and international),” Association President Haji Haroon Chand said in comments to The Express Tribune. “Pakistan bullion market has become Rs2,500 per tola cheaper than Dubai one,” he said. “The undervalued gold offers golden buying opportunity these days, but unfortunately buyers have gone completely missing in the market,” he said.
Price of gold falls post-rupee appreciation
The situation may encourage gold smugglers to cash the opportunity, he said. “Lack of purchasing power is the only reason behind the gold being undervalued in Pakistan,” Chand said, adding the rupee devaluation of around 25% in the last 10 months has turned the businesses upside down. “I am sitting at my Tariq Road’s jewellery shop since morning and it is around six (on the clock) in the evening and not a single buyer has come,” he said.
'Green gold': Pakistan plants hundreds of millions of trees
“I have not seen such a bad situation throughout my life,” the 70-year old Haji Haroon added. “The prolonged uncertainty about economic policies and undue pressure on businessmen and politicians have badly shaken the business confidence in the bullion market,” he said. According to details, half of the drop in gold price (Rs1,000) was seen the day the rupee made a notable recovery of 1.4% to Rs132.03 to the US dollar in the interbank market on Wednesday, following Saudi Arabia’s announcement of a $6-billion assistance package for Pakistan.
The remaining drop was recorded in the last three days (Thursday-Saturday) of the week when rupee lost Rs0.42 to Rs132.45 to the greenback cumulatively on Thursday and Friday in the interbank market. The international gold market has moved in a narrow band of $11 per ounce between $1,224 to Rs1,235 in the last two weeks, according to the association.