The domestic bullion market recently halted its impressive streak of consecutive gains, triggered by unexpectedly high U.S. inflation figures.

GOLD PRICES TAKE A HIT

On the international stage, spot gold hovered around $2,159.28 an ounce after witnessing a decline of $24.21 or 1.11% the previous day. This reaction came in the wake of the latest U.S. consumer price index (CPI) report for February 2024, which indicated a 3.2% year-on-year increase. This slight uptick from January’s 3.1% and exceeding market forecasts has caught investors off guard.

XAUUSD posted an intraday high of $2161.64 and intraday low of $2155.90. Gold is currently trading at $2159.34 (2:37pm Wednesday, 13 March 2024 (GMT+5) Time in Pakistan). A day earlier!

GOLD TECHNICAL ANALYSIS

The core CPI, which excludes volatile food and energy prices, also reported an unexpected rise to 3.8% year-on-year, compared to the anticipated 3.7%, hinting at underlying inflationary pressures.

Despite these hotter-than-expected inflation figures, the CME FedWatch Tool signals a 69.23% likelihood of a U.S. Federal Reserve interest rate cut in June 2024, suggesting an intriguing future dynamic for interest rates and inflation control measures.

MetricActualEstimate
CPI MoM+0.4%+0.4%
CPI YoY+3.2%+3.1%
Core CPI MoM+0.4%+0.3%
Core CPI YoY+3.8%+3.7%

 

INFLATION AND THE FED’S RESPONSE

The rise in CPI from February 2023’s 6% to 3.2% year-on-year demonstrates the Federal Reserve’s partial success in its aggressive rate hikes and balance sheet reductions to temper inflation. However, inflation levels still exceed the Fed’s 2% target, highlighting the ongoing challenge of stabilizing the economy.

A HIT HITS GOLD PRICES

Unexpectedly, 24-karat gold experienced a notable decline of Rs1,800, ultimately closing at Rs228,300 per tola. Following an incredible spike last week that saw gold prices almost double to Rs 10,000 per tola—the highest level since September 2023—this decline follows.

The cost of a 10-gram 24-karat gold dropped by Rs1,544 to Rs195,730, according to the Karachi Sarafa Association. Meanwhile, the 10-gram 22-karat gold did not escape the slump, falling to Rs179,420.

SILVER HOLDS ITS STABILITY

On the other hand, silver prices remained stable despite the volatility in the gold market. Indicating stability in this bullion market segment, the prices for 24-karat silver per tola remained at Rs2,600, while the rate for 10 grammes was Rs2,229.08.

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