Gold prices continued to decline in Pakistan on Tuesday, with 24-karat gold dropping by Rs7,000 to Rs270,500 per tola, reflecting global trends. The Karachi Sarafa Association reported 24-karat gold at Rs231,911 per 10-gram, a decrease of Rs6,000. Similarly, the 22-karat gold price slipped to Rs212,584 per 10-gram. Silver prices also faced declines, with 24-karat silver priced at Rs3,250 per tola (-Rs50) and Rs2,786 per 10-gram (-Rs43).
On the global stage, spot gold hovered around $2,596 per ounce, down $28 or approximately 1.07% from the prior session. This marked the first time since late September that the precious metal slipped below the $2,600 mark. The continued strength of the US Dollar has placed sustained pressure on gold, making it less attractive to investors.
Key Market Factors: Strong Dollar and Bond Yields Weigh on Gold
The “Trump trade” — a market term referencing the anticipated economic policies of US President-elect Donald Trump — has fueled a stronger US Dollar, reaching levels not seen in four months. This strength has pressured gold, which traditionally moves inversely to the dollar.
Trump’s proposed fiscal policies are anticipated to drive US economic growth and potentially increase inflation, reducing the need for further rate cuts by the Federal Reserve. US Treasury yields remain elevated, making bonds more attractive than non-yielding assets like gold. Notably, Minneapolis Fed President Neel Kashkari commented that the central bank is closely watching inflation trends before making further rate decisions.
Global Trade Concerns and Potential Federal Reserve Action
In addition to dollar strength, Trump’s stance on trade — including a potential 10% tariff on imports — has raised concerns about global trade tensions. While these factors typically support safe-haven assets like gold, they are currently being outweighed by the strong dollar and high bond yields.
Traders now await guidance from several Federal Open Market Committee (FOMC) members, including Fed Chair Jerome Powell, regarding future interest rate decisions. The CME Group’s FedWatch Tool shows a 65% likelihood of a quarter-point rate cut, although recent inflation data could shift the central bank’s stance.
Technical Analysis: Gold’s Vulnerability to Further Declines
From a technical standpoint, gold’s recent drop below its 50-day Simple Moving Average (SMA) has sparked bearish sentiment. Indicators show that the metal’s downward momentum is not yet oversold, suggesting that it could experience further declines.
Should gold decisively break the $2,600 level, it could target the $2,540-2,539 range, a key support area comprising the 50% Fibonacci retracement level and the 100-day SMA. Conversely, if gold can recover and surpass $2,632-2,635, this could trigger short-covering, with potential resistance around $2,684-2,685 en route to $2,700 and above.
Outlook
Gold’s vulnerability appears set to continue as long as the dollar remains strong and bond yields elevated. The Federal Reserve’s upcoming guidance on inflation and interest rates will play a crucial role in determining gold’s next moves.
