Domestic bullion in Pakistan fell on Friday, coinciding with global trends and signalling a significant decline in gold prices. In line with movements in the world gold market, the price of 24-karat gold fell by Rs4,200 to end at Rs228,200 per tola. A day earlier!

During the early part of the European session on Friday, the XAU/USD pair continued its downward trajectory, extending the retracement slide from its record peak. The prevailing optimism regarding the US economy has propelled the US Dollar (USD) to a three-week high, thereby exerting pressure on the commodity market. Additionally, positive market sentiment and hopes for a ceasefire in Gaza have further weighed on the safe-haven appeal of gold.

FEDERAL RESERVE’S PROJECTIONS AND MARKET SENTIMENT

The Federal Reserve (Fed) has projected a less restrictive policy stance, signaling three interest rate cuts for 2024. This has bolstered expectations for a potential move at the June policy meeting. The decline in US Treasury bond yields adds to the narrative, potentially restraining aggressive USD bullish bets and providing support to gold prices, which traditionally serve as a non-yielding asset.

WAITING FOR CONFIRMATORY SIGNS

It is advisable to await strong follow-through selling before considering further positions amidst the ongoing depreciating trend in XAU/USD.

DROP IN 24-KARAT GOLD PRICES

Yesterday’s surge in gold prices in Pakistan, witnessing a rise of Rs4,600 per tola, was followed by a contrasting decline, indicating the volatility prevalent in the precious metal market. The Karachi Sarafa Association disclosed that the price of 24-karat gold stood at Rs195,645 per 10-gram, marking a significant decrease of Rs3,600. Similarly, the price of 22-karat gold also experienced a dip, quoted at Rs179,341 per 10-gram.

In tandem with the downward trend in gold, silver prices also faced a decline. The price of 24-karat silver was noted at Rs2,580 per tola and Rs2,211.93 per 10-gram, showcasing a decrease of Rs20 per tola and Rs17.15 per 10-gram, respectively.

GLOBAL MARKET INDICATORS

Internationally, spot gold witnessed a retreat subsequent to its surge beyond $2,200 an ounce, marking a significant milestone. The pullback occurred following signals from the Federal Reserve indicating a steadfast approach towards three interest-rate cuts within the year.

GOLD TECHNICAL ANALYSIS

From a technical standpoint, breaking below the $2,146-2,145 support zone or the weekly low is crucial for bears to assert near-term control. A decisive breach of this level could drive gold prices towards the $2,128-2,127 support zone, with a potential target of the $2,100 mark.

Conversely, the $2,200 psychological barrier emerges as an immediate resistance level. Beyond this, bullish momentum may aim to challenge the record high around the $2,223 zone observed on Thursday. It’s noteworthy that while the Relative Strength Index (RSI) on the daily chart has moderated from elevated levels, it still signals overbought conditions, warranting careful consideration for traders.

XAUUSD posted an intraday high of $2186.16 and intraday low of $2162.68. Gold is currently trading at $2167.28 (2:55pm Friday, 22 March 2024 (GMT+5) Time in Pakistan). A day earlier Gold was trading at $2204.89 (2:55pm Thursday, 21 March 2024 (GMT+5) Time in Pakistan) March 2024 (GMT+5) Time in Pakistan).

FACTORS INFLUENCING CORRECTION

Driving gold’s correction, the dollar exhibited a resurgence, climbing by 0.8% after hitting a one-week low. This uptick in the dollar’s strength rendered bullion relatively more expensive for overseas buyers, contributing to the downward pressure on gold prices.

OUTLOOK AND SPECULATIONS

Daniel Ghali, commodity strategist at TD Securities, highlighted that the overnight aggressive buying momentum appeared to have waned, leading to corrective movements in gold prices. Despite the recent corrections, the rates markets only marginally factored in the possibility of additional rate cuts for the year 2024.

Traders are currently factoring in a 72% likelihood of the Fed initiating rate cuts in June, showcasing an increase from the pre-rate decision estimate of 65%.

In conclusion, while gold prices in Pakistan exhibited a retreat in line with global corrections, market sentiments remain influenced by speculations surrounding future rate cuts and the dynamics of the international economic landscape.