In a notable dip, gold prices in Pakistan witnessed a decline on Tuesday, with 24-karat gold losing Rs1,200 to stand at Rs241,100 per tola. Notably, this price adjustment has been set Rs3,000 below its actual cost for today, a move attributed to the diminishing purchasing power. The Karachi Sarafa Association, shedding light on this decision, stated, “In view of the significant reduction in purchasing power, the price of gold today has been kept under cost by Rs3,000.”
This adjustment comes on the heels of last week’s surge, where 24-karat gold saw an increase of Rs5,500 per tola.
According to the latest report from the Karachi Sarafa Association, the price of 24-karat gold now stands at Rs207,733 per 10 grams, reflecting a decrease of Rs943. Similarly, 22-karat gold witnessed a decline, now quoted at Rs189,479 per 10 grams.
Contrarily, silver prices remained stagnant in the domestic market, with 24-karat silver maintaining its price at Rs2,650 per tola and Rs2,271.94 per 10 grams.
On the global stage, international spot gold hovered close to $2,338.4 an ounce, following a 1% decline observed yesterday.
GOLD PRICE HOLDS STEADY IN THE $2,330S AMID GEOPOLITICAL TENSIONS
On Tuesday, the price of gold (XAU/USD) stabilized in the $2,330s as ongoing geopolitical tensions continued to fuel demand for the safe-haven asset.
Despite this stability, potential gains may be tempered by recent data from the US suggesting that interest rates are likely to remain elevated for the foreseeable future. This factor could diminish the attractiveness of gold, which typically doesn’t yield interest like other investments.
Geopolitical tensions, however, have provided a solid floor for the gold price. Rising protests against Israel’s occupation of Gaza, along with Russia’s involvement in Ukraine, and concerns over global trade disruptions have heightened the perceived threat level of geopolitical risks.
IMF ISSUES WARNING ON GLOBAL TRADE RISKS
Gita Gopinath, the First Deputy Managing Director of the IMF, delivered a cautionary address at the Stanford Institute for Economic Policy Research on Monday. She highlighted the concerning trend of countries reassessing their trading partners based on economic and national security considerations. Gopinath warned that if this trend persists, it could lead to a widespread retreat from the established global trade norms, potentially undoing the progress made through economic integration.
The imposition of Western and US sanctions on countries like Russia, Iran, and other emerging markets has contributed to the fragmentation of trade alliances along geopolitical lines. Consequently, investors and central banks are turning to gold as a hedge against these uncertainties.
GOLD EMERGING AS AN ALTERNATIVE TO THE US DOLLAR
The shift by BRICs nations away from the US Dollar for international trade transactions has amplified the demand for gold as a viable alternative. This transition has been a key driver behind the recent surge in non-Western central bank acquisitions of gold, accompanied by a corresponding reduction in US Dollar reserves.
Gold is increasingly being considered as a substitute for the US Dollar, particularly in trade agreements among nations with volatile domestic currencies. The Carnegie Endowment for International Peace, a Washington-based advisory service, suggests that gold is viewed as a secure store of value in such arrangements, potentially offsetting the reliance on the US Dollar in global trade deals.
GOLD FACES CONSTRAINTS AMID US ECONOMIC DATA
The potential upside for gold prices may encounter limitations, particularly in light of recent data from the Reserve Bank of New York, which indicates that US consumers anticipate a continued increase in shop prices over the next year. This data suggests that the Federal Reserve (Fed) may need to maintain elevated interest rates for an extended period to address inflationary pressures.
April’s New York Consumer Sentiment report, unveiled on Monday, revealed that inflation expectations for the upcoming year surged to 3.3%, up from 3.0% in March, a level consistent since November 2023. This reading surpasses the Federal Reserve’s 2.0% target and implies a likelihood of prolonged higher interest rates by the Fed.
Given that gold is a non-interest-bearing asset, it becomes less appealing when real interest rates are elevated. Real interest rates, which account for inflation, continue to remain relatively high according to data from the Federal Reserve Bank of Cleveland. This scenario escalates the opportunity cost associated with holding assets like gold, which do not generate yields.
TECHNICAL ANALYSIS: GOLD PRICE FINDS SUPPORT AMID BACKSLIDE
In recent sessions, the price of gold (XAU/USD) experienced a decline but has since stabilized, finding support above key levels.
Breaking below significant support levels established by previous highs around $2,350, gold has managed to find support just above another cluster of highs near $2,330.
Analyzing the XAU/USD 4-hour chart, despite the recent correction, the precious metal maintains a bullish short-term trend. As the adage goes, “the trend is your friend,” suggesting a likelihood of the trend resuming and pushing prices higher. Currently, there are no clear indications that the uptrend is recommencing, although the bearish momentum during the pullback has diminished, at least for the time being.
In the event that the uptrend does resume, the next target for gold would be approximately $2,400, roughly aligning with the April highs. A decisive break above the May 10 high of $2,378 would serve as confirmation of this bullish continuation.
Examining the medium and long-term charts (daily and weekly), they also portray a bullish outlook, providing additional support for gold.
