Gold prices in Pakistan experienced a decline on Tuesday, with the price of 24-karat gold dropping by Rs500 per tola to reach Rs240,000. This follows a larger decline of Rs6,400 per tola last week, resulting in a cumulative loss of Rs14,200 per tola over the past two weeks, equivalent to 5.63%.
The Karachi Sarafa Association reported the price of 24-karat gold at Rs205,761 per 10 grams, representing a decrease of Rs429 day-on-day. Similarly, the price of 22-karat gold was quoted lower at Rs188,615 per 10 grams.
Conversely, silver prices remained unchanged in the domestic market, with 24-karat silver being sold at Rs2,620 per tola and Rs2,254.8 per 10 grams.
On the global front, international spot gold traded near $2,314.5 an ounce, marking a decrease of 0.41% compared to the previous close. This decline in global gold prices likely contributed to the downward trend observed in the domestic market.
The fluctuation in gold prices, both domestically and globally, reflects ongoing market dynamics and investor sentiment influenced by factors such as economic indicators, geopolitical tensions, and monetary policy decisions.
GOLD PRICE SLIPS AS US DOLLAR STRENGTHENS
On Tuesday, the price of gold (XAU/USD) experienced a decline of roughly a third of a percent, trading in the $2,310s. This dip comes as the US Dollar (USD) rebounds, leading to a reduction in the cost of gold, which is priced in USD.
The decline in gold prices on Tuesday can be attributed to the strengthening of the US Dollar, which makes gold less expensive for buyers using other currencies.
Despite last week’s US Nonfarm Payrolls data indicating a weaker labor market, which had initially suggested the possibility of the Federal Reserve (Fed) cutting interest rates sooner than expected, recent commentary from Fed members has shown a reluctance to rush into lowering borrowing costs.
Richmond Fed President Thomas Barkin, speaking on Monday, noted that the current level of interest rates should help moderate economic growth and bring inflation closer to the Fed’s target of 2.0%. However, he cautioned that achieving this target could be a “stubborn road back,” indicating that it might take some time for inflation to return to desired levels.
Overall, the decline in gold prices on Tuesday reflects the interplay between currency movements, particularly the strength of the US Dollar, and market expectations regarding monetary policy and economic conditions, as influenced by statements from central bank officials.
FED COMMENTS AND MARKET EXPECTATIONS INFLUENCE GOLD PRICE
New York Fed President John Williams recently commented on the possibility of future rate cuts, stating that while job growth may moderate, the Fed would carefully assess all available data before making any decisions. This cautious approach reflects the Fed’s commitment to considering the entirety of economic indicators before adjusting monetary policy.
Market sentiment regarding potential rate cuts has been reflected in pricing, with markets pricing in rate cuts of approximately 46 basis points from the Fed by the end of 2024. The first cut is expected as early as September or November, according to FXStreet’s Editor Lallalit Srijandorn.
In technical analysis, the gold price (XAU/USD) has encountered resistance at the top of a range around $2,326, leading to a retreat. Currently, the price is finding support around the 50 Simple Moving Average (SMA) on the 4-hour chart at $2,317.
There is a possibility of further pullback, with potential support at the base of the range around $2,280, reinforced by the 200 SMA and prior lows around $2,300.
However, a decisive break above the range ceiling could signal a bullish momentum, potentially leading to a move towards a conservative target of $2,353 or even higher, potentially reaching $2,370. A decisive break would be characterized by specific candlestick patterns indicating sustained upward momentum.
GOLD PRICE ANALYSIS: POTENTIAL BEARISH PATTERN UNFOLDING
The gold price appears to be in the midst of unfolding a bearish Measured Move price pattern, which commenced on April 19. These patterns typically consist of three waves labeled A, B, and C, with C often equaling the length of A or a Fibonacci 0.681 extension of A.
Currently, the price has descended to what could be considered the conservative estimate for wave C, reaching $2,286, which corresponds to the Fibonacci 0.681 level of wave A. However, there remains the possibility for further downside movement, with wave C potentially extending to the 100% extrapolation of A at $2,245.
Confirmation of this scenario would entail a decisive break below the established range and the May 3 low at $2,277. Such a move would indicate a continuation of the bearish trend.
Despite the short-term bearish outlook, it’s worth noting that the trend for the gold price remains upward on both medium and long-term charts, providing a supportive backdrop to the overall outlook. This suggests that any bearish movements may be temporary or corrective within the broader bullish trend.
As always, investors should carefully monitor price action and key support and resistance levels to assess the evolving market dynamics and adjust their trading strategies accordingly.
