On Friday, the price of per tola of 24-karat gold in Pakistan increased by Rs 700, reaching Rs 241,700 compared to the previous trading day’s price of Rs 241,000. The price of 10 grams of 24-karat gold also saw an increase of Rs 600, now at Rs 207,219 from Rs 206,619. Similarly, the price of 10 grams of 22-karat gold rose to Rs 189,950 from Rs 189,400, according to the All Sindh Sarafa Jewellers Association.
Meanwhile, the price of per tola and ten-gram silver remained constant at Rs 2,850 and Rs 2,443.41, respectively. A day earlier!
INTERNATIONAL GOLD MARKET
In the international market, gold prices increased by $22, reaching $2,326 from the previous $2,304.
Gold (XAU/USD) edged marginally lower, trading in the $2,320s on Friday, ahead of the main economic data event for the week, the US Personal Consumption Expenditures (PCE) – Price Index for May. The PCE is the US Federal Reserve’s preferred inflation gauge, and the results could influence the Fed’s interest rate trajectory.
IMPACT OF US PCE DATA ON GOLD PRICES
Gold, being a non-interest-bearing asset, is influenced by interest rate levels. Higher interest rates make gold less attractive to investors, whereas lower rates increase its appeal. The PCE data, scheduled for release at 12:30 GMT, could induce volatility in gold prices. The consensus estimate is for PCE inflation to fall to 2.6% year-over-year (YoY) in May from 2.7% in April and to stay unchanged at 0.0% month-over-month (MoM) after rising 0.3% in April. Core PCE is expected to cool to 2.6% from 2.8% YoY and to 0.1% from 0.2% MoM.
Jim Reid, Global Head of Macro at Deutsche Bank, suggests core PCE might increase by +0.17% MoM based on existing CPI and PPI data, which would reduce the YoY rate to 2.63%, the lowest in over three years.
FED COMMENTARY AND MARKET EXPECTATIONS
Recent comments from Fed officials have influenced gold prices. Atlanta Fed President Raphael Bostic indicated the possibility of future rate cuts, with expectations for an interest rate cut in the fourth quarter followed by four quarter-point cuts in 2025. Conversely, Fed Board of Governors member Michelle Bowman was more cautious, suggesting the Fed is not yet ready to consider rate cuts.
Market-based predictions show a 64% probability of the Fed cutting interest rates at or before the September meeting, according to the CME FedWatch tool.
LONG-TERM OUTLOOK FOR GOLD
Gold’s long-term prospects remain positive due to geopolitical uncertainties in the Middle East, Ukraine, climate change, and tech-driven economic challenges, which all contribute to the demand for gold as a safe haven. The relationship between gold and the US Dollar is also complex; while a strong dollar negatively impacts gold prices, it has led to increased demand from Asian central banks hedging against currency devaluation.
The BRICS trade confederation’s strategy to use gold as a replacement for the US Dollar in global trade further supports gold’s long-term value. Joy Yang, Head of Index Product Management & Marketing at MarketVector Indexes, believes these global trends will push gold higher in the future, potentially reaching $2,400, especially if the Fed decides to cut interest rates.
TECHNICAL ANALYSIS
Gold has broken above the downsloping trendline connecting the “Head” and “Right Shoulder” of the previously formed bearish Head and Shoulders (H&S) pattern, further invalidating the H&S formation.
