Gold at Rs416,778 on futures frenzy

Bullion futures cross $4,000/oz globally; rupee strengthens marginally

KARACHI:

Gold prices in Pakistan rose on Tuesday, tracking gains in the international market, where US gold futures broke past the unprecedented $4,000 per ounce level for the first time.

The surge was driven by expectations of an upcoming Federal Reserve rate cut and sustained safe-haven demand amid the ongoing US government shutdown.

In the local bullion market, the price of gold per tola increased by Rs1,500 to reach Rs416,778, according to data released by the All Pakistan Sarafa Gems and Jewellers Association. Similarly, the rate for 10 grams rose by Rs1,286 to Rs357,319. On Monday, the price had already jumped by Rs5,400 per tola to Rs415,278.

US gold futures for December delivery settled 0.7% higher at $4,004.4, after hitting the high of $4,014.6, as per Reuters. Spot gold was up 0.6% to $3,985.82 per ounce as of 01:48 pm EDT (1748 GMT), after hitting an all-time high of $3,990.85 earlier in the session.

Interactive Commodities Director Adnan Agar said the current rally in gold was primarily being driven by futures activity rather than spot prices. In the futures market, it broke the $4,000 level.

Agar noted that despite the record-breaking rally, the market appeared "overstretched" and may be due for a correction. "I've been watching gold for 15 years and have never seen it this overbought. The rally is too strong, even bullish trends have limits," he said.

Agar added that profit-taking was likely once investors began to view current price levels as unsustainable. "If something doubles or triples in price, that's understandable. But when it goes up six or seven times, investors start locking in profits. We may soon see a selling phase once a trigger appears."

However, with the US government partially shut down and key economic data releases delayed, there are currently few catalysts for a sell-off. He suggested that a potential resolution of the political standoff between the Democrats and Republicans could serve as a turning point. "A deal to end the shutdown will likely bring gold down," he said.

Agar recalled that gold's major rally began in 2023 amid the Israel-Palestine conflict, which spurred global safe-haven demand. "Now that peace talks are progressing, gold should ideally be cooling, but instead it's being driven by FOMO – the fear of missing out," he observed.

He cautioned that the international market remained heavily overbought, and a correction of at least $200 was "almost certain" once sentiment shifted. "If gold reaches $4,020 to $4,050 in the spot market, we could see a pullback. After that, prices may stabilise for a few months," he said.

Despite short-term risks, major institutions remain optimistic in the long term. Goldman Sachs has projected that gold could reach $4,900 by December 2026. At the current pace, that looks aggressive, but their forecast is based on a year's horizon, not three months, Agar said.

Meanwhile, the Pakistani rupee edged slightly higher against the US dollar, appreciating by 0.01% in the inter-bank market. By the day's close, the local currency stood at 281.22 per dollar, marking a modest gain of three paisa from Monday's close at 281.25.