Gold plunged 3% to an 18-day low

Gold plunged 3% to an 18-day low

Gold prices fell a little over 3%, or Rs7,800 per tola (11.66 grams), intraday, falling to an 18-day low of Rs240,900 in Pakistan on Tuesday, mirroring global trends.

The commodity has seen a total decline of nearly 5%, or Rs11,300 per tola, in the past two days compared to the all-time high of Rs252,200 reached on Saturday (April 20), according to data from the All Pakistan Gems and Jewelery Association. .

The sharp correction in the global commodity market came after it fell 4.02%, or $102 per ounce (31.10 grams), in the past two days, reaching $2,309 per ounce on Tuesday.

Director of Interactive Commodities, Adnan Agar explained to The Express Tribune that the easing of the geopolitical crisis in the Middle East caused global investors to opt for profit selling. While Israel has retaliated against Iran, Tehran has restrained itself, reducing geopolitical tensions in the region.

He noted that gold fell to $2,290 an ounce during the day but rose back to $2,330 an ounce by evening in Pakistan.

The commodity is expected to remain range-bound in the coming days, projected to fluctuate between $2,350-2,360 on the upside and $2,250 per ounce on the downside.

Agar noted that Friday’s upcoming US data on commodity prices will provide a new direction for global commodity markets going forward.

Inflation rates are once again rising in the global economy (US). This trend is likely to prevent the US central bank – the Fed – from cutting its interest rates in June 2024, moving expectations for the first rate cut to September 2024.

“This shows the medium-term prospect of gold remaining on the rise in the international market. Buyers remain active in the market. They returned to buying counters as soon as the precious metal slipped below $2,300 an ounce, driving it back to today’s (Tuesday, April 23) opening of $2,330 an ounce.”

However, there are concerns about gold’s rise of $400 per ounce in the past four weeks. Such a surge calls for a market correction of around $200-250 per ounce. It remains difficult at this point to predict when this correction will occur, Agar added, noting that gold hit an all-time high of $2,431 per ounce on April 12, 2024.

Mr. Gold Market

Agar emphasized that the rupee’s history of depreciation remains a strong factor in the rapid surge in gold prices in Pakistan relative to the global market, as the rupee-dollar parity plays an important role in determining global commodity prices for the local market.

He recalled that gold cost Rs7,000 per tola in Pakistan when it was available at $1,920 an ounce in the international market in 2011.

Last week, the commodity hit an all-time high of $2,431/ounce in global markets on April 12, 2024, up 27% (or $511/ounce) over the past 13 years. However, during the same period, gold jumped 35-fold (or 3,503%) or by Rs245,200 per tola, reaching a record high of Rs252,200 per tola in Pakistan on April 20, 2024.

Gold continues to remain a safe haven for global and local investors to invest their savings and avoid devaluation.

Rupee Falls

The development coincided with the domestic currency depreciating by Rs0.04 to Rs278.37 against the US dollar in the interbank market amid rising import values in March 2024, according to data reported by the State Bank of Pakistan (SBP).

The gradually depreciating domestic currency has declined cumulatively by 0.48%, or Rs1.34, in the past four weeks against a five-and-a-half-month high close of Rs277.03 per dollar in the last week of March 2024.

The rupee continued to depreciate slowly even as the country reported a nine-year-high current account surplus of $619 million for March 2024 on Monday, indicating that the supply of foreign currency remains higher than demand in the local market.

However, the rupee fell due to a slow increase in the value of imports in recent months, rising to around $4.4 billion in March from less than $4 billion a few months ago.

Agar suggests that the rupee will depreciate in the long run.