KARACHI: Gold soared to a fresh peak at Rs86,250 per tola (11.66 grams) and the rupee strengthened to a one-month high at 158.25 to the US dollar after China devalued its currency to over a decade low and global economies cut key interest rate.
“A reduction in imports into Pakistan and import of petroleum oil on deferred payment helped the rupee strengthen against the dollar,” an expert commented.
Gold price touches fresh peak at Rs78,100 per tola
Gold price surged Rs1,750 per tola in a single day to the record high of Rs86,250, taking cue from the international market where the precious metal hit over six-year high above $1,500 an ounce (31.10 grams), the All Sindh Saraf and Jewellers Association (ASSJA) reported on Wednesday.
The precious metal had surged $32 to $1,495 per ounce in the global market by the time the jewelers association announced prices for local bullion markets for the next 24 hours. Later, it hit an intra-day high of $1,510 per ounce in the London market.
“The safe haven status of gold sparked euphoric buying in the world market after central banks around the world either cut or prepared to cut the key interest rate to stimulate their respective economies in a scenario where the US-China trade war has slowed down the global economy,” said Rays Commodities Chief Operating Officer Adnan Agar.
The US central bank - Federal Reserve - has recently slashed the key interest rate by 25 basis points to 2-2.25%. “It is expected to further reduce the rate in coming months to adjust its economy in response to the escalation in trade tensions with China,” he said.
China, on the other hand, devalued its currency to over a decade low against the US dollar to cope with the challenges it faced in the wake of additional tariffs imposed by the US on Chinese goods.
Gold touches another historic high at Rs80,500 per tola
The US-China trade spat has pushed global economies to revise down their key interest rate to cope the developing situation. New Zealand, India and Thailand surprisingly cut the rate on Wednesday. The European Central Bank has announced that it will slash the rate in September. Japan, the UK and Australia were also expected to follow in their footsteps, he said.
ASSJA President Haji Haroon Chand added that persistent standoff between the US and Iran in the Middle East also fueled the gold rally. “China and Russia are aggressively buying gold to avert losses due to depreciation of their respective currencies,” he said.
Gold remained cheaper in Pakistan compared to Dubai despite a notable hike of Rs1,750 per tola. “Gold remained undervalued by Rs2,500 per tola in Pakistan compared to Dubai,” he said and anticipated that the precious metal may go further up in the Pakistan market.
Agar projected that the metal may touch $1,520-1,530 per ounce by the weekend in the world market. Later, it may come down by $60-70 for a few days. “Movement in gold largely depends on international events,” he remarked.
The rupee remained on an uptrend for the eighth consecutive day on Wednesday. Cumulatively, it had strengthened 2.33, or 1.45%, in the eight working days and touched the one-month high of 158.25 to the US dollar in the inter-bank market.
Agar pointed out that Islamabad had managed to cut imports as well as trade and current account deficits. Moreover, imports of petroleum oil on deferred payment worth $275 million a month from Saudi Arabia have also eased the pressure on the rupee. “Pakistan’s decision to snap diplomatic and economic ties with India may again invite pressure on the rupee in a day or two,” he said.
Published in The Express Tribune, August 8th, 2019.
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