As the precious metal is the preferred investment during economic instability, the price of gold in Pakistan rose Wednesday to resume its fantastic run following record-high January inflation.
The price of gold (24 carats) climbed by Rs3,500 per tola and Rs3,000 per 10 kilos to settle at Rs205,000 and Rs175,754, respectively, according to data issued by the All-Pakistan Sarafa Gems and Jewellers Association (APSGJA).
As the rupee slightly strengthened against the US dollar on Tuesday and investors closely watched the US Federal Reserve’s decision to raise interest rates and its forecast for policy, the price of gold had its biggest one-day decline ever.
As Pakistan’s headline inflation surged to a record high level in January due to shortages of food and a sharp spike in the price of petroleum items, demand for the yellow metal increased, driving up gold prices.
According to data provided by the Pakistan Bureau of Statistics (PBS) on Wednesday, consumer prices increased by 27.6% in comparison to 13% in the corresponding month previous year. Since May 1975, when the median inflation rate was 27.77%, this is the greatest year-over-year inflation rate.
However, investors were only buying gold bars, not jewellery, which cut the profit margins for goldsmiths and put the labour force at risk of losing jobs as jewellery producers turned to other forms of investment.
Today’s decrease in international gold prices was caused by investors staying away in anticipation of the US Federal Reserve’s later-today announcement of its policy about the direction of interest rates.
As of 0929 GMT, spot gold was up $27 to $1,929 per ounce after dropping the previous day to its lowest level since January 19. At $1,939.70, US gold futures were down 0.3%.
“It’s pretty certain that the Fed is going to hike rates by 25 basis points,” said Michael Hewson, chief market analyst at CMC Markets.
But “the risk is very much towards the downside for gold, because Powell needs to slightly reset market expectations about what’s likely to come afterwards”, he added.
Meanwhile, silver prices in the domestic market remained stable and settled at Rs2,250 per tola and Rs1,929 per 10 grams, respectively.