Gold surges to fresh all-time high of Rs96,300 per tola

Jump in coronavirus cases in Italy, Korea spurs buying of safe-haven asset

KARACHI: Markets across the world were jolted as fears of a coronavirus pandemic threatened global growth outlook and sent gold prices soaring to a new all-time high of Rs96,300 per tola in Pakistan on Monday.

Global share markets and oil fell as investors poured money into safe-haven gold following a rapid jump in cases of the virus in South Korea, Iran and Italy. The price of gold soared $40 to a seven-year high of nearly $1,690 an ounce in the global market, All Sindh Saraf and Jewellers Association (ASSJA) President Haji Haroon Chand told The Express Tribune.

The price of the precious metal went up Rs2,000 from Rs94,300 per tola in the local market last week. Attributing the increase to coronavirus, Chand remarked that due to buying in the international market, the impact had also been felt in the local market.

The deadly virus has now killed 2,592 people in China, which has reported 77,150 cases, and spread to some 28 other countries and territories, with a death toll outside of China around two dozen, according to a Reuters’ tally.

“Search for safety has driven appeal for safe haven as an uncertain global economic outlook has shifted investors’ focus away from equities and commodities,” said MAFA Capital CEO Muzammil Aslam.

“The spread of coronavirus is feared to badly impact the global economy,” Rays Commodities’ former chief operating officer Adnan Agar said while talking to The Express Tribune. He said the stock market had also reacted strongly to the uptick in infection cases being reported in Italy, South Korea and Iran.

“It can become a pandemic, which the World Health Organisation (WHO) has not declared as yet,” he said, adding that the trend suggested that it was headed towards a global pandemic.

“In such situations, investors shift to safe havens. When equity prices drop, investment returns to gold.”

Economic activity in China, the world’s second-largest economy, has been drastically slashed to avoid the spread of the virus. “An estimated 70-80% of production capacity is staying shut in China since the outbreak of the virus,” Agar stated.

He said the gold price was expected to reach $1,700 to $1,710 an ounce but right now it did not seem that prices would rise that much. “Gold prices may increase $20-30 and face a short-term correction.”

Talking about the significant surge, he said the local market had taken more impact as it was closed when prices increased on Friday evening.

Agar was of the view that the global economic slowdown and recession in some economies may spark a new wave of inflation and currency depreciation around the world.

Published in The Express Tribune, February 25^th, 2020.

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