Gold hits new highs on rate cut bets

Safe haven surpasses Rs415,000/tola amid global rally towards $4,000; rupee inches up

KARACHI:

Gold prices in Pakistan soared to new all-time highs on Monday, mirroring the international surge that pushed the precious metal above $3,900 per ounce, fueled by growing expectations of a US Federal Reserve rate cut and heightened economic and political uncertainty in the United States, France, and Japan.

According to the All Pakistan Sarafa Gems and Jewellers Association (APSGJA), the price of gold per tola reached Rs415,278 after a single-day rise of Rs5,400, while the rate for 10 grams rose by Rs4,629 to settle at Rs356,033. On Saturday, the per-tola price had already climbed to Rs409,878 following a gain of Rs2,100.

The latest rally marks a continuation of gold's seven-week winning streak, during which the metal has repeatedly set new records. However, analysts now warn that the rally may be overstretched.

In a post on X, market watcher Walter Bloomberg quoted the Bank of America (BofA) as saying that gold's surge may "cool as it nears $4,000/oz." The bank noted that such seven-week uptrends have historically been followed by short-term pullbacks since 1983, adding that gold is now trading well above key moving averages, with momentum indicators flashing overbought signals.

BofA expects a pause or correction before any renewed upward move, possibly towards $5,000 per ounce in the longer run.

Commenting on the situation, Interactive Commodities Director Adnan Agar said gold's recent strength has stretched the rally significantly. "Gold is still standing at the same high. So far, it has set an all-time high of $3,950, and it is around $3,947," he said.

"As soon as the market opened, it increased by $50-60. Now, warnings are also coming from international brokers because the rally has stretched a lot. For seven weeks, the candles have been closing green – meaning prices have been consistently rising. So the chances are now very high that a correction will come."

Agar added that the $4,000 level is a psychological resistance, prompting many investors to book profits, which could lead to a $100-200 correction before the next bullish leg.

"We believe the market will come close to $4,000, then correct by $100-200, and afterwards resume its upward move," he said. Meanwhile, silver prices also recorded an uptick, rising by Rs53 per tola to reach Rs4,949.

The Pakistani rupee registered a slight uptick against the US dollar in the inter-bank market on Monday. By the day's end, the local currency stood at 281.25, marking a modest appreciation of one paisa.

Over the past week, the rupee also posted a marginal weekly gain, strengthening by 11 paisa, or 0.04%, against the dollar. According to data from the State Bank of Pakistan (SBP), the rupee had closed the previous week at 281.26 compared to 281.37 a week earlier.