Gold surges to 3-month high at Rs221,000 per tola

KARACHI:

The price of gold hit a three-month high at Rs221,000 per tola (11.66 grams) in Pakistan, following a global trend, as the domestic currency remains largely stable at around Rs285 against the US dollar in the interbank market on Wednesday.

With the latest increase of Rs2,600 per tola in the day, the precious metal has cumulatively increased by 2.45% or Rs5,300 in the past four consecutive working days to date, according to the All Pakistan Sarafa Gems and Jewellers Association.

According to State Bank of Pakistan’s (SBP) data, the domestic currency ticked up for the second successive working day by 0.05%, or Rs0.13, to close at Rs285.39 against the greenback.

The currency has been fluctuating near and around the currency level for the past around 10 days.

While talking to The Express Tribune, AA Gold Commodities, Director Adnan Agar said gold has hit a seven-month high at $2,047 per ounce (31.10 grams) in the international market. This provided the basis for the local bullion pricing body to revise up the rate to the recent high in the country.

He mentioned that the strong expectation for an interest rate cut by the US central bank – Federal Reserve – anytime between March and May 2024 has encouraged global investors to take new positions in the safe haven of gold in recent days. A similar situation exists in Pakistan where investors are anticipating a rate cut due to the expected slowdown in inflation in the near future.

The uptrend in the precious metal was also backed by a notable increase in the US quarterly GDP growth to 5.2%, surpassing the expectation of 4.5% for the quarter ended September 30, 2023. Other contributing factors include a drop in the international oil price, weakening of the US dollar against other major global currencies, and the Gaza truce expansion.

Read: Gold soars to one-month high

Agar said, “Gold may test a new all-time high near and around $2,100 per ounce in December ahead of Christmas buying and speculation for a US interest rate cut.”

International investors are relocating their savings into the safe haven of gold these days from fixed income instruments like US bonds, he said.

The metal hit a previous all-time high of $2,085 per ounce in April 2023, he recalled.

In the medium run, however, gold is expected to face a drastic drop in profit booking, as international stock markets are expected to attract investors in a couple of months when global inflation readings and US interest rates go down.

“People will sell gold to buy stocks, as gold does not pay dividends like stocks,” he said.

Exchange Companies Association of Pakistan (ECAP) President Malik Bostan said the rupee remains stable in the wake of the multibillion-dollar investment expectations over the next four to six months.

“The rupee will recover to its fair value of Rs250/$ when the strongly expected investment and multilateral inflows come into Pakistan,” he said.

The rupee will recover gradually in phases from the current Rs285/$ to Rs275/$, then to Rs265/$, and finally to Rs250/$, he said.

Published in The Express Tribune, November 30^th, 2023.

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