Gold retreats amid Hormuz tensions

Gold prices in Pakistan declined on Tuesday, tracking a subdued trend in the international market, as investors remained cautious ahead of a key geopolitical deadline set by Donald Trump regarding Iran and the Strait of Hormuz.

In the local market, the price of gold per tola dropped by Rs3,000 to settle at Rs488,462. Similarly, the rate for 10 grams of gold decreased by Rs2,572 to Rs418,777, according to data released by the All-Pakistan Gems and Jewellers Sarafa Association.

The decline comes a day after gold prices rose, with per-tola rate reaching Rs491,462 on Monday following a gain of Rs1,100.

In the international market, spot gold remained largely unchanged at $4,648.32 per ounce by midday trading, after gaining nearly 1% earlier in the session. Meanwhile, US gold futures edged down 0.3% to $4,670.90.

Market sentiment remained cautious as investors awaited developments surrounding tensions between the United States and Iran. Reports suggest Iran has shown no immediate indication of complying with Washington's demand to reopen the Strait of Hormuz, a critical global oil shipping route.

Analysts noted that uncertainty over whether the deadline will be extended or lead to escalation has kept markets range bound over the past few days.

According to Adnan Agar, Director at Interactive Commodities, the looming deadline, expected to be early Wednesday Pakistan time, has kept investors on edge. He explained that if a diplomatic agreement is reached, gold prices may rise further as safe-haven demand persists, while oil prices could ease due to reduced tensions.

However, failure to reach a deal may push gold prices lower in the short term, although any escalation in the military conflict could trigger sharp gains in bullion due to heightened risk sentiment. Gold prices hovered around $4,660 during the session, after briefly touching the low near $4,600 before recovering by $50-60.

Meanwhile, silver prices in Pakistan remained unchanged at Rs7,744 per tola. Adding to the global backdrop, China continued to increase its gold reserves, with the People's Bank of China reporting its holdings rose to 74.38 million fine troy ounces by the end of March, marking the 17th consecutive month of purchases. Analysts expect gold markets to remain volatile in the near term, with direction largely dependent on geopolitical developments and upcoming signals from the US Federal Reserve.

The Pakistani rupee posted a slight appreciation against the US dollar in the inter-bank market on Tuesday. By the close of trading, the local currency settled at 279.06, gaining Rs0.01 against the greenback. On Monday, it had closed at 279.07.

Meanwhile, the US dollar hovered near recent highs as market participants monitored a looming US deadline for Iran to reopen the Strait of Hormuz or risk potential strikes on its infrastructure.