Gold hits record high at Rs263,700/tola

Global market uncertainty, economic speculation drive surge in prices

KARACHI:

Gold prices in Pakistan soared to a new record high of Rs263,700 per tola (11.66 grams) on Saturday, marking a fresh increase of Rs1,700, according to the All Pakistan Sarafa Gems and Jewellers Association.

The metal pricing body reported that this latest rise follows a $20/ounce (31.10 grams) increase in global gold prices, which surged back to Wednesday's all-time high of $2,512. The rebound in international prices was recorded after the association announced Friday's prices for local markets, as global gold markets remain closed on Saturdays.

The international market had previously seen a cumulative drop of $20/ounce over the two days leading up to the announcement of Friday's prices in Pakistan.

Saturday marked the fifth consecutive working day of rising gold prices, with a total increase of Rs3,700 per tola over this period. Despite these gains, the association noted that gold in Pakistan is still undervalued by Rs1,000 per tola compared to the international market in Dubai.

Analysts attribute the surge in gold prices to speculation that the US Federal Reserve may implement its first interest rate cut next month, in September, to bolster economic activity and job creation in the world's leading economy. The US recorded disappointing job creation data in July, raising fears of a potential recession. A rate cut, the first in four years, could help businesses expand production.

Additionally, geopolitical tensions in the Middle East and Europe have fuelled the rally in international gold markets, which is also reflected in domestic prices. Since Israel's declaration of war on Palestine in October 2023, gold prices have jumped by $700/ounce, surpassing $2,500. Global financial institutions project that the precious metal could reach new highs of $2,600 to $2,700/ounce in 2024.

However, experts anticipate a brief drop of $300-400 per ounce following the release of new US job data for August or after the Federal Reserve's monetary policy announcement in September 2024. This fluctuation in international prices is expected to impact domestic markets as well.

The surge in gold prices is also partly driven by countries like Russia, China, and Turkey increasing their gold reserves to mitigate potential financial losses from currency devaluations.