Gold prices in Pakistan saw a substantial drop on Thursday, with 24-karat gold priced at Rs276,800 per tola, reflecting a decrease of Rs5,400. The Karachi Sarafa Association also reported that 24-karat gold for 10 grams dropped by Rs4,630 to Rs237,311, while 22-karat gold was at Rs217,535 per 10 grams. Silver prices followed suit, with 24-karat silver falling by Rs130 per tola to Rs3,300 and by Rs111 per 10 grams to Rs2,829.
Reasons Behind the Decline
The main driver of this decline is the strengthened U.S. dollar, which surged after Donald Trump secured the U.S. presidency. Trump’s election is anticipated to lead to a pro-dollar economic agenda that includes tariff measures and potential tax cuts, making USD-denominated assets like gold more expensive for international buyers. This shift triggered significant selling in bullion markets, with international spot gold prices trading around $2,660 per ounce, down by 3.09% over the last two sessions.
Market Impact and Investor Sentiment
Gold, traditionally a safe-haven asset, usually benefits from geopolitical uncertainty. However, Trump’s assurances of settling international conflicts, including in the Middle East and Ukraine, may have reduced some safe-haven demand. Additionally, investors appear to be reallocating to riskier assets like Bitcoin (BTC), which hit new highs on speculation that Trump might ease crypto regulations. The stock market also surged as investors anticipated looser regulation and lower corporate taxes under a Republican-led government.
Technical Analysis of Gold (XAU/USD)
- Short-Term Trend: Gold is now in a short-term downtrend, breaking below the significant $2,700 level to trade in the $2,650s. Technical indicators, such as the Relative Strength Index (RSI), show oversold conditions, which could limit further declines in the immediate term.
- Downside Levels: A daily break below $2,643 could lead to further declines toward $2,605, aligning with the longer-term trendline support.
- Upside Levels: If gold recovers and pushes above $2,790, it could signal a re-confirmation of the medium-term uptrend, with possible resistance targets at $2,800 and $2,850.
Broader Trend Outlook
While the short-term outlook is bearish, gold remains in an uptrend in the medium and long term, with potential for a reversal if market conditions shift. Investors may watch the dollar’s performance and Federal Reserve policy moves for future cues, as any dovish signals from the Fed could provide support for gold prices.
In summary, gold faces a challenging environment due to a stronger dollar and investor rotation into riskier assets, though technical indicators suggest limited further downside in the short term.
