KARACHI: Gold price shot up Rs1,700, or 2.11%, to a record high of Rs82,000 per tola (11.66 grams) in Pakistan in line with the uptrend in the world market on Thursday.
The bullion price increased by a staggering $24 to $1,420 per ounce (31.10 grams) in afternoon trading in the London market.
The massive hike led the All Sindh Saraf and Jewellers Association to “partially pass on the surge to local buyers”, Association President Haji Haroon Chand told The Express Tribune.
Despite the notable surge in the domestic market, the gold price was still lower by Rs3,000 per tola when compared with the Dubai market. “Import of gold from Dubai costs Rs85,000 per tola in Pakistan,” he said.
“We opted not to fully pass on the surge in the international market to local consumers keeping in view the recent drop in the consumers’ purchasing power and the reduction in demand for the commodity due to a continued surge in its prices,” he said.
The gold price maintained the uptrend in the world market due to mounting tensions between the US and Iran, the US-China trade war and the development of a strong scenario for key interest rate cut in the US, he said.
The surge also came due to fresh buying of the commodity by Chinese and Russian central banks as they were converting their foreign currency reserves into gold due to likely decline in global currencies, he said.
“Investment in gold is a better option than the dollar these days,” he remarked. “I guess gold will surge to $1,450 per ounce in the next two to three weeks,” he said keeping in view the recent trend.
Rays Commodities Chief Operating Officer Adnan Agar said gold had emerged as a safe haven for global investors due to growing tensions between the US and Iran and slowdown in the global economy due to US-China trade spat.
US central bank Federal Reserve is considering cutting its key interest rate by 25 basis points to 2.25% in the next monetary policy statement due on July 30 to make credit cheaper for the private sector with the aim of reviving economic activities, which took a hit due to the US-China trade friction.
“There are 90% chances Fed will cut the rate by 25 basis points,” he said. “The low interest rate scenario always increase demand for the safe haven commodity (gold),” he said.
He said several European countries including Switzerland and the UK were also considering cutting their key interest rate to revive economic activities in their countries.
“The implementation of the decision will take the key interest rate into negative territory as the interest rate in their countries stands at around zero per cent at present,” he said.
He said gold may see profit-booking in coming days in the world market. However, it will maintain the uptrend in the short to long run as technical levels suggest. “The $1,370-1,380 per ounce has become a very strong support zone on the downward side,” he said. “It will cross the strong resistance level of $1,500 per ounce by December 2019 or early 2020,” he said.
The gold price in local markets is not surging only due to the uptrend in the world market.
A continued weakening of the rupee was another leading reason behind the uptrend in bullion prices in the domestic market.
The rupee has cumulatively dropped Rs1.92, or 1.22%, in the past five days and closed at 158.48 to the US dollar in the inter-bank market on Thursday.
The gradual drop in the rupee came due to high demand for the dollar against thin supply in the system as the country has continued to make aggressive international payments to partially pay off the huge foreign debt and for imports.
Published in The Express Tribune, July 12th, 2019.