The surge was led by a speculative increase in demand, rising prices for imported commodities
KARACHI: The price of gold reached an all-time high of close to Rs100,000 per tola (11.66 grams) in Pakistan on Monday mainly due to increased speculative demand and partly due to rising prices for imported commodities on world markets.
The precious yellow metal inflates Rs 1,400 to Rs99,700 per tola in the country. The price edged up to $ 3 an ounce (31.10 grams) to more than seven years at $ 1,690 on the London market before the All Sindh Nerves and Jewelers Association (ASSJA) announced local prices around 4:30 pm for the next 24 hours.
All jewelry workshops and outlets lay closed under the national lock today. However, Pakistan Mercantile Exchange (PMEX) – a commodity futures market in a country that works online – and the Karachi Bullion Exchange – which continues to function through telephone contact – continues to operate.
“The latest prices for local markets are determined to keep in mind the prices at which trade occurs between buyers and sellers on the Karachi Bullion Exchange (the country’s main gold market),” Hajj Haroon Association president Chand Rasheed told The Express Tribune.
The price of gold rises throughout the world. In addition, international currencies; the US dollar strengthens globally. And the local currency (versus the US dollar) continues to depreciate. “The factors bring gold prices to new highs on the gold market and the local market,” he said.
Former Head of Commodity Operations Sinar Adnan Agar said the rise in gold prices was largely based on speculation and appeared to be unsustainable worldwide.
“Physical demand for gold has dropped to zero. Gold price growth is seen in futures contracts which are mostly speculative, “he said.
“People prefer to save cash to overcome the situation that is in the midst of a pandemic and locking up the corona virus worldwide. “The US dollar has emerged as the preferred refuge for investors at this time of testing because it remains an acceptable currency worldwide … even the Chinese currency (yuan) is largely unacceptable worldwide,” he said .
The US dollar continues to strengthen against other major world currencies such as the British pound, European euro and Chinese yuan. “This currency trend has pushed gold prices beyond purchasing power in many countries such as Pakistan. The emergence of physical demand for gold is a must for further growth in prices worldwide, “he said.
“Demand for gold is expected to remain slow in responding to the prevailing conditions in which the world is fighting against the coronavirus pandemic. India and China are the two leading gold buyers in the world. They are, among other things, busy fighting COVID-19, “he said.
The recent gold spike comes on the back of a slight slowdown in the growth of cases of infection in developed countries like Spain and Italy, he said. “The health crisis is not over. If a case like that surges again gold will fall, “he said.
Gold has jumped $ 225 an ounce since mid-March to around $ 1,700 currently on world markets. As such, the price soared Rs10,200 per story during the same period in Pakistan.
Chand stated that the latest price of Rs97,300 was below cost. “The new price is less than Rp. 7,000 than what the prices on the Dubai market are. “If we import gold today, the costs will be close to Rs109,000 per tola including taxes on imports,” he said.
Meanwhile, Agar said that the price of gold might move slightly higher than $ 1,700 an ounce under the current uptrend cycle. “Short-term prospects are negative. It will continue to trade in the range of $ 1,600-1,750 per ounce in the medium term (one to two months). The long-term outlook depends on developments related to the health crisis whether it worsens or improves, “he said.
“Massive depreciation in rupees (against the dollar) has pushed gold prices to new record highs,” he said.
Published in The Express Tribune, April 14th, 2020.
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