Gold surges by Rs2,500/tola on geopolitical tensions

SBP reports cumulative two-day rupee gain, closing at Rs277.76/$ at interbank market

KARACHI:

The price of gold in Pakistan surged by Rs2,500 to Rs280,500 per tola (11.66 grams) in line with global trends, maintaining a winning streak for the fifth consecutive working day on Friday.

On the other hand, the domestic currency appreciated by Rs0.20 to close at Rs277.76 against the US dollar in the interbank market, continuing the uptrend for the second successive day.

The All Pakistan Sarafa Gems and Jewellers Association reported that gold prices have cumulatively risen by Rs13,100 (5%) over the past five days. The metal is now just Rs7,400 per tola shy of its all-time high of Rs284,900 per tola, recorded in late

October 2024.

In the international market, gold surged $25 to $2,693 per ounce (31.10 grams) during the day, reflecting a cumulative gain of $131 per ounce over the past five days. In the global market, gold reached a record high of $2,784 per ounce in late October.

Speaking to The Express Tribune, Abdullah Abdul Razzak, a member of the association, attributed the price surge to rising geopolitical tensions in Europe. Reports that Russia has installed nuclear weapons and threatened Ukraine with their use have driven extended demand for the safe haven of gold, causing a continuous rise in the commodity's price. "Wars always support bullion prices to rise," he said.

The metal may continue to remain volatile over the next two months until US President-elect Donald Trump takes office in January 2025. Prices could rise further with increased geopolitical tensions or decline with a diffusion of the crisis, he observed.

Gold is expected to record a notable drop after Trump returns to the White House, as he stated in his victory speech that he wants no wars during his new four-year tenure and aims to end conflicts worldwide, Razzak added.

On the currency front, the State Bank of Pakistan (SBP) reported a cumulative two-day rupee gain of Rs0.28, closing at Rs277.76 per dollar in the interbank market. Meanwhile, the Exchange Companies Association of Pakistan (ECAP) noted a Rs0.17 improvement in the open market, with the currency closing at Rs278.77 per dollar on Friday.

The rupee's recent strength comes on the back of a $29 million increase in foreign exchange reserves, which reached a 31-month high of $11.29 billion for the week ending November 15, 2024, according to SBP data.

The growth in reserves suggests there is an ample supply of foreign currency compared to demand, supporting the rupee to remain stable in the short to medium run.