The price of gold per tola in Pakistan experienced a notable decrease on Thursday, with 24-karat gold being sold at Rs261,500 per tola, marking a decline of Rs2,200. The Karachi Sarafa Association reported that the price of 24-karat gold also fell on a per 10-gram basis, reaching Rs224,194, down by Rs1,886.
GLOBAL GOLD MARKET SEES SLIGHT INCREASE
Contrary to the decline in Pakistan’s local market, the global gold market witnessed a slight increase. Spot gold traded near $2,518 an ounce, up $9.9 or 0.39% from the previous session.
GOLD PRICE BOOSTED BY CHINA DEMAND REVIVAL
Gold prices have seen an uptick after a report from the World Gold Council (WGC) on Tuesday indicated a revival in demand from China. The report showed that China’s net gold imports surged by 17% in July, marking the first increase since March. This rise in demand, coupled with a modest increase in net inflows of 8 metric tons (approximately $403 million) led by North American funds last week, is providing support to gold prices globally.
GOLD BENEFITS FROM WEAKENING US DOLLAR
The precious metal is also gaining from a weakening US Dollar (USD), to which it is negatively correlated. The US Dollar Index (DXY) has been retreating, trading in the 100.90s on Thursday after pulling back from a peak of 101.18reached on Wednesday. The slide in the USD is making gold more attractive as an investment, further boosting its price.
US ECONOMIC DATA COULD INFLUENCE GOLD PRICES
Traders are now focusing on upcoming US economic data, including the Jobless Claims and Gross Domestic Product (GDP) figures due on Thursday. These data points are expected to provide more clarity on the future path of US interest rates. The jobs data is particularly significant as Federal Reserve (Fed) Chairman Jerome Powell recently highlighted the risks to the labor market from maintaining high-interest rates during his speech at Jackson Hole. Economists expect the GDP data, which is a revision of the first estimate for Q2, to remain steady at 2.8%.
Negative macroeconomic data could push gold prices higher by suggesting that the Fed may need to reduce interest rates more quickly than previously anticipated. Lower interest rates tend to make gold more attractive because it does not yield interest, making it a preferred asset during periods of falling rates.
SPECULATION ON FED’S RATE CUTS AND IMPACT ON GOLD
While a rate cut at the Fed’s September 18 meeting is already fully priced in by the markets, the magnitude of the cut remains uncertain. There is speculation around a potential 0.50% “mega cut”, with current probabilities standing at 34.5%, according to the CME FedWatch tool.
Additionally, the December 2024 Chicago Board of Trade (CBOT) fed funds futures contract is pricing in a total of 100 basis points of Fed cuts, or 1.00%, by the end of the year. This implies a 0.50% interest-rate cut at one of the remaining three Fed meetings scheduled for 2024.
FRIDAY’S INFLATION DATA COULD BE CRUCIAL FOR GOLD
Friday could be a significant day for gold as the Fed’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Price Index, is set to be released. Economists expect core PCE inflation to rise to 2.7% in July from 2.6% in Juneyear-on-year. Any divergence from this estimate could impact gold prices. Higher-than-expected inflation would likely weaken gold by suggesting that the Fed needs to keep interest rates elevated for longer, whereas a lower-than-expected result could strengthen gold.
LONG POSITIONING RISKS AND TECHNICAL ANALYSIS
There are risks associated with the current extreme long positioning in gold, as noted by Daniel Ghali, Senior Commodity Strategist at TD Securities. Ghali warns that the market is now crowded, increasing the downside risks. On Thursday, TD Securities announced a tactical short position in gold, with an entry at $2,533, a target at $2,300, and a stop loss at $2,675.
From a technical analysis perspective, gold is consolidating within a mini-range between $2,500 and $2,531. While the short-term trend appears to be sideways, the medium and long-term trends remain bullish. A break above the $2,531August 20 all-time high could signal a continuation higher towards the $2,550 target. Conversely, a break back inside the range, confirmed by a daily close below $2,470, could indicate the start of a short-term downtrend.
PAKISTAN
22-KARAT GOLD PRICE ALSO DROPS
In addition to the drop in 24-karat gold, the price of 22-karat gold was also quoted lower at Rs205,511 per 10-gram. This downward trend reflects the broader movement in the domestic gold market.
SILVER PRICES REMAIN UNCHANGED
While gold prices saw a decrease, silver prices in the domestic market remained stable. The price of 24-karat silver was reported at Rs2,950 per tola and Rs2,529 per 10-gram, showing no change from the previous rates.
