Gold prices fall, rupee devalues

Bullion down by Rs1,400/tola on US inflation talk; rupee at 278.72/$, losing 4 paisa

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KARACHI:

Gold prices in Pakistan experienced a consecutive second day of decline on Tuesday, mirroring a similar trend in international markets. The price per tola dropped by Rs1,400, settling at Rs277,900 in the local market. Similarly, the price of 10-gram gold fell by Rs1,201, closing at Rs238,254, according to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA).

On Monday, the price per tola had already decreased by Rs1,500, ending at Rs279,300. Internationally, gold was priced at $2,661 per ounce on Tuesday, with a $20 premium, marking a $14 drop.

Adnan Agar, Director of Interactive Commodities, remarked, "There hasn't been much movement in the gold market today." The price fluctuated between a high of $2,675 and a low of $2,660, amounting to a $15 range, and was last seen at $2,668. The lack of volatility stems from market anticipation of the US monthly inflation data release today (Wednesday).

Agar explained that if inflation rises, the US Federal Reserve might pause its interest rate cuts. Conversely, if inflation trends downward, the Fed could maintain its current approach. Over the past two months, inflation data has shown a gradual uptick, and today's figures are expected to either align with the previous month or remain stable without notable changes.

The gold market is also bracing for potential economic implications of Donald Trump's return to the political scene on January 20, said Agar. If Trump reintroduces tariffs similar to those during his previous tenure, inflation could spike, prompting the Fed to maintain its current stance on interest rates and delay further cuts until the broader economic effects of such policies become evident.

Globally, gold markets remained cautious ahead of key US inflation data. Spot gold was relatively stable at $2,663.29 per ounce as of 1440 GMT, after briefly climbing 0.5% following the release of the Producer Price Index (PPI) data. The PPI showed an annual increase of 3.3% in December, slightly below the 3.4% rise expected by economists polled by Reuters.

Meanwhile, the Pakistani rupee remained relatively steady against the US dollar on Tuesday, registering a minor depreciation of 0.01% in the interbank market. By the close of the trading day, the rupee ended at 278.72, reflecting a marginal loss of 4 paisa against the dollar. On Monday, the currency had closed at 278.68, according to data from the State Bank of Pakistan (SBP).

Globally, the US dollar hovered near its highest level in over two years on Tuesday, driven by robust economic data that prompted traders to adjust their expectations for US interest rate cuts in 2025. Simultaneously, concerns over the UK's fiscal stability kept the British pound under pressure.