Gold jumps ahead of US Fed policy decision

Local prices rise Rs3,500/tola; rupee remains on upward trajectory

KARACHI:

Gold prices in Pakistan increased by Rs3,500 per tola on Wednesday, despite a slight decline in international market, as investors awaited the US Federal Reserve's monetary policy decision and comments from its chair for clues about the future path of rates.

In the local market, gold prices rose to Rs425,636 per tola, according to rates released by the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA). Similarly, the price of 10-gram gold increased by Rs3,001 to reach Rs364,914. On Tuesday, gold prices had declined by Rs1,300 per tola, settling at Rs422,136. Wednesday's increase reversed those losses and pushed domestic bullion prices higher. In the international market, spot gold edged down 0.3% to $4,044.54 per ounce by 11:46 am EDT (1546 GMT), as per Reuters. US gold futures for December delivery fell 0.4% to $4,057.30 per ounce. Higher oil prices weighed on bullion, while concerns over supply disruptions in the Middle East added to market uncertainty. Rising energy prices can fuel inflationary pressures, potentially influencing the pace of monetary easing by major central banks.

Investors remained cautious ahead of the Federal Reserve's policy announcement, scheduled for 2 pm EDT (1800 GMT), followed by a press conference by Fed Chair Kevin Warsh.

Market participants were looking for signals on the central bank's assessment of inflation and economic conditions, as well as indications of whether interest rates could decline further.

Rate expectations are a key driver of gold prices because bullion does not pay any yield. Lower rates generally make gold more attractive relative to interest-bearing assets, while expectations of tighter monetary policy can weigh on bullion demand. Investors were also looking ahead to the US personal consumption expenditures (PCE) index, due on Thursday. The measure is closely watched by the Federal Reserve as an indicator of inflationary trends. Developments in oil markets and geopolitical tensions in the Middle East were also expected to remain important factors for investors assessing inflation risks and the outlook of monetary policy.

Silver prices in Pakistan increased by Rs61 per tola to reach Rs5,854 on Wednesday. Meanwhile, the Pakistani rupee continued its upward trajectory, gaining Rs0.03 against the US dollar to close at 276.77 in the inter-bank market. On Tuesday, the local currency had settled at 276.80 against the greenback. Internationally, the US dollar held near two-week highs ahead of central bank policy decisions, with the Federal Reserve widely expected to keep rates unchanged while signalling the possibility of a move in December.

Fed holds rate steady

Later on Wednesday, the Federal Reserve held interest rates steady, as expected, opting to delay any changes to borrowing costs until after next week's US midterm elections and awaiting further data on the path of inflation.