KARACHI: In the local bullion market, there was an intense corrective move downwards after the price of gold in Pakistan followed a huge single day decline as per the international market trend. The price of gold per tola dropped by Rs 12,627 to Rs 442,436.
This sudden fall is experienced shortly after a temporary pause in selling activity witnessed in the previous trading session, thus reversing the week’s positive trend and compelling jewelers in various cities to reduce their physical metal rates.
International Spot Pressures Cause Domestic Retail Prices to Fall
As per the data verified by All-Pakistan Gems and Jewellers Sarafa Association (APGJSA), the decline in domestic prices reflects the change witnessed in international markets. The base price of gold in the international spot market decreased by $126, reaching $4,200 an ounce, including a $20 premium allocation.
According to financial analysts, these liquidations are largely a result of wider geopolitical trends taking place in the Middle East region, where rising tensions between military parties have somehow made the U.S. Dollar stronger. Since gold prices are calculated against the dollar currency internationally, when there is a rise in the strength of the index, gold becomes relatively expensive for foreign buyers.
Silver and Mid-Level Commodities Depressed By Consolidated Downturn
- The strong downtrend witnessed in the precious metals category was not limited to just the gold market; the silver industrial and retail market also experienced their own downturns in value as follows:
- Price Decrease Per Tola: Silver prices were lowered to Rs6,929, a decline of Rs385 for each tola of the metal.
- Value Decrease Per 10 Grams: In addition, the price of silver per 10 grams was decreased to Rs5,893, a decrease of Rs352.
Market Analysis: Historically, gold was a classic defensive investment when there is an inflationary environment. But, with international macro trends suggesting that interest rates will remain high for the foreseeable future, the cost of holding precious metals that yield no interest has become higher. Capital is being moved to cash and sovereign bonds by institutional players.
ALSO READ: Gold Takes a Nosedive in Pakistan as Prices Plunge by Rs12,489 Per Tola
Retail Sector Braces for Change in the Season
The drop in gold prices in Pakistan is likely to result in a buying spree in local retail shops. Given that the local weddings play an important role in deciding the pattern of luxury goods shopping, a drop in price of over Rs12,000 per tola would be a welcome change at this stage.
Preparation of Local Retail Sectors for Changing Demand
With the recent fall in the rate of gold in Pakistan, a short-term buying spree is likely in the domestic market sectors. This is mainly because the domestic wedding season is very dominant in determining the purchasing trends for luxuries, and therefore the fall by more than Rs12,000 per tola will be welcome news to many consumers.
