Geopolitical tensions send gold to new peak

KARACHI:

The potential escalation in the Middle East crisis pulled the rupee down to almost four-week low at Rs279.29 against the US dollar in the inter-bank market on Tuesday and sent gold to a new record high at Rs249,700 per tola (11.66 grams).

According to State Bank of Pakistan’s (SBP) data, the rupee further depreciated 0.06%, or Rs0.17, and closed at a 26-day low at Rs279.29 against the greenback. The currency has cumulatively dropped 0.45%, or Rs1.26, in the past three weeks compared to the five-and-a-half-month high of Rs277.03/$ reached in late March 2024.

The Middle Eastern crisis has fueled a surge in international crude oil prices, which is gradually piling pressure on the rupee. Talking to The Express Tribune, Ismail Iqbal Securities Deputy Head of Research Saad Hanif said the government revised up petroleum product prices twice in the past three weeks, contending it was passing on the increase in global oil prices to end-consumers.

Hanif, however, did not give much importance to the day-to-day nominal drop in the rupee-dollar parity and described it as a usual movement like the rupee appreciation in recent days.

The rupee will remain stable around Rs280/$ in the short run. The expected receipt of the International Monetary Fund’s (IMF) tranche of $1.1 billion later this month should prop up the currency and keep it strengthened near current levels.

It may depreciate to a maximum of Rs285/$ by the end of June 2024 in case the gradual downward trend continues for the exchange rate. Later, the IMF’s conditions for a new loan programme and budget announcement for the next fiscal year would give a clear direction to the rupee from July onwards, Hanif pointed out.

Exchange Companies Association of Pakistan reported that the local currency ticked down Rs0.02 on a day-on-day basis and closed at Rs279.68/$ in the open market.

Gold shines

All Pakistan Saraf Gems and Jewellers Association on Tuesday revised the gold price up by Rs2,400 to an all-time high at Rs249,700 per tola (11.66 grams) in line with the global trend.

The association reported that the precious metal rose $20 and reached a record high at $2,391 per ounce (31.10 grams) in the international market.

Global commentators associated the bullion price hike with the escalating geopolitical tensions as investors shifted their savings to the safe-haven gold to avoid the impact of devaluation of their respective currencies.

Any easing and resolution of the crisis will lead to a speedy reversal in the gold market, as it has jumped around $400 per ounce in the past five weeks to the current record levels.

Published in The Express Tribune, April 17^th, 2024.

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