On Monday, the price of 24-karat gold per tola in Pakistan increased by Rs. 200, reaching Rs. 275,700, up from Rs. 275,500 the previous trading day, according to the All Sindh Sarafa Jewellers Association. The price of 10 grams of 24-karat gold also saw a rise of Rs. 171, climbing to Rs. 236,368 from Rs. 236,197. Additionally, 10-gram 22-karat gold went up to Rs. 216,671 from Rs. 215,256.
In contrast, the price of silver remained unchanged, with per tola of silver priced at Rs. 3,050 and 10 grams at Rs. 2,614.88.
International Market Trends
In the international market, gold prices increased by $3, reaching $2,659 from $2,656. Gold (XAU/USD) continued its positive momentum for the third consecutive day, climbing to the $2,667 level during the European session, the highest in over a week.
This uptrend in gold prices can be attributed to expectations that the US Federal Reserve will continue to cut interest rates, driven by favorable inflation data. Additionally, ongoing geopolitical tensions in the Middle East are providing further support for gold as a safe-haven asset.
Gold (XAU/USD) Recovers Amid Safe-Haven Demand and Economic Stimulus Expectations
Gold prices recovered on Monday, trading back in the $2,660 range as safe-haven demand surged in response to escalating tensions involving the Chinese People’s Liberation Army (PLA) near Taiwan. A spokesperson from the US Department of State expressed “serious concern” regarding the PLA’s activities, further fueling investor interest in gold.
Factors Driving Gold Prices
- Geopolitical Tensions: The increasing military assertiveness of China in the Taiwan Strait has heightened fears of conflict, leading investors to seek refuge in gold, traditionally viewed as a safe-haven asset.
- Chinese Economic Stimulus: Gold’s appeal is also bolstered by a more optimistic outlook for the Chinese economy. On Saturday, Chinese Finance Minister Lan Fo’an announced a significant fiscal stimulus program aimed at addressing regional government debt issues through a large-scale local government debt swap. Although specific figures were not disclosed, the announcement signals a potential turning point in China’s fiscal policy framework, which is crucial given that China is the largest market for gold.
- Interest Rate Outlook: The ongoing expectation of global interest rate cuts has also been a catalyst for gold prices. The European Central Bank (ECB) is set to conclude its October meeting on Thursday, with analysts predicting another 25 basis point rate cut. Such moves indicate a shift in the ECB’s easing cycle, which can positively influence gold prices.
In the US, investors are anticipating a similar 25 basis point cut from the Federal Reserve in November. Recent Producer Price Index (PPI) data revealed that headline PPI remained unchanged in September, missing expectations, while core PPI inflation rose to 2.8%, suggesting mixed signals that may lead the Fed to maintain a dovish stance.
Technical Analysis of Gold Prices
Gold appears to have completed a correction at the lows reached on October 10 and is currently on the rise.
- Resistance Level: The metal has encountered resistance around $2,670, corresponding to previous highs from October 1 and 4. A close above this level could signal a continuation of the upward trend, potentially reaching the all-time high of $2,685.
- MACD Indicator: The Moving Average Convergence Divergence (MACD) has moved above the zero line, indicating a mildly bullish trend.
- Potential Pullback: There remains a possibility that gold could bounce off the resistance level and retrace back into its established range between $2,620 and $2,670, extending the range-bound movement observed since late September.
Long-Term Outlook
The medium and long-term trends for gold remain bullish, with the potential for further upward momentum if any of these longer-term cycles resume. As geopolitical tensions persist and economic stimuli take effect, gold may continue to attract investors, driving prices higher in the coming weeks.
In summary, gold’s recovery amid rising geopolitical concerns and favorable economic prospects underscores its role as a secure investment during times of uncertainty, setting the stage for potential price advancements in the near future.
