Gold prices in Pakistan surged on Thursday, with 24-karat gold witnessing a notable increase of Rs1,600 to reach Rs245,600 per tola. Notably, the current price remains Rs3,000 below its actual cost.
The association attributed this pricing strategy to the significant reduction in purchasing power, emphasizing that the price of gold has been deliberately kept under cost by Rs3,000.
Last week, 24-karat gold had experienced a gain of Rs5,500 per tola, indicating continued volatility in the market.
The Karachi Sarafa Association reported the price of 24-karat gold at Rs210,562 per 10-gram, marking an increase of Rs1,371. Similarly, the price of 22-karat gold also saw an uptick, reaching Rs193,016 per 10-gram.
Moreover, silver prices witnessed momentum in the domestic market, with 24-karat silver being sold at Rs2,730 per tola and Rs2,340.53 per 10-gram. This represents a gain of Rs80 per tola and Rs68.59 per 10-gram.
Internationally, spot gold traded near $2,387.58 an ounce after a 1.2% increase yesterday.
Meanwhile, the latest US consumer price index (CPI) for April 2024 rose by 3.4% year-on-year, slightly lower than the 3.5% recorded in March. On a sequential basis, US CPI increased by 0.3% month-on-month, below market expectations of 0.4%. This marks the first cooler-than-expected inflation report in six months, potentially impacting market sentiments and investment strategies moving forward.
GOLD RALLY FIZZLES, BUT LONG-TERM OUTLOOK STAYS BRIGHT
Gold prices dipped slightly on Thursday after a surge on Wednesday, but analysts remain optimistic about the precious metal’s long-term prospects. Here’s a breakdown of the key factors:
Recent Price Movement:
- Rally and Correction: Gold prices initially jumped on Wednesday after the release of US inflation data, but then retreated slightly on Thursday due to profit-taking.
- Disinflationary Trend: The lower-than-expected US inflation figures suggest a potential slowdown in price increases, which could impact future interest rate decisions.
Factors Influencing Gold:
- Interest Rates: Lower interest rates are generally positive for gold as they decrease the appeal of holding interest-bearing assets like bonds.
- US Dollar: A weaker US dollar, triggered by the inflation data, also tends to benefit gold prices as the metal is primarily traded in dollars.
- Central Bank Demand: Central banks, particularly those in emerging markets, continue to be strong buyers of gold, providing underlying support for the price.
- Geopolitical Risks: Geopolitical tensions around the world can drive investors towards safe-haven assets like gold.
- Trade Concerns: Fears of a trade war or fracturing of global trade can also increase demand for gold.
Analyst Opinion:
- Despite the short-term correction, analysts believe the overall outlook for gold remains positive.
- Strong demand from central banks, high geopolitical risks, and global trade uncertainties are seen as supportive factors.
- The first quarter of 2024 saw the strongest demand for gold since 2016, according to the World Gold Council.
GOLD PRICE RETREATS AFTER REACHING RESISTANCE
Gold (XAU/USD) prices experienced a pullback after encountering resistance around $2,400. This price movement can be analyzed using the following technical indicators:
Relative Strength Index (RSI):
- The RSI on the 4-hour chart entered the overbought zone, exceeding 70. This signaled potential overvaluation and a likelihood of price correction, which is what we’re currently observing.
Support and Resistance:
- Gold’s uptrend encountered resistance at $2,400. Failure to break above this level indicates selling pressure and a potential price pullback.
Current Trend:
- Despite the pullback, gold remains within a broader uptrend on the 4-hour chart. This uptrend suggests an underlying bullish bias, and the pullback could be a temporary correction.
Potential Future Movement:
- If the RSI exits the overbought zone (below 70), it might indicate a continuation of the correction. A deeper drop could be expected if the price falls below the short-term uptrend line.
- Conversely, if the price breaks above $2,400 with a confirmed close on the 4-hour chart, it could signal a continuation of the uptrend. This could lead to a test of the next resistance level at $2,417, followed by the all-time high of $2,430.
Confirmation from Higher Timeframes:
- The analysis of daily and weekly charts can offer additional confirmation. If these charts also show bullish signals,it strengthens the overall uptrend for gold.
Overall, the technical analysis suggests a potential pause in the gold price rally due to the encounter with resistance and overbought RSI. However, the uptrend remains intact for now. A breakout above $2,400 or a sustained drop below the uptrend line will provide clearer direction for future price movements.
Important Disclaimer: This technical analysis is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial professional before making any investment decisions.
