Gold has maintained a downtrend in international and domestic markets ahead of a summit between North Korean and United States leaders, which is supposed to be held on Tuesday (June 12), as global investors exit from the safe haven asset on hopes of success of the talks.
The yellow metal lost 4.4%, or Rs2,650, to close at Rs57,600 per tola (11.66 grams) in the domestic market on Saturday, significantly lower than the current year’s peak of Rs60,250 reached on April 19, according to the All Sindh Saraf and Jewellers Association.
Traditionally, gold is a safe haven for investors and moves up when international political tensions escalate and vice versa.
The North Korea-US summit is expected to be focused on dismantling the nuclear programme of Pyongyang.
‘Chances of success of the summit stand low, but gold investors are playing down in the hope of the summit’s success,’ Rays Commodities Chief Operating Officer Adnan Agar said while talking to The Express Tribune.
Gold prices in Pakistan stand almost equal to the international rates. They are set by a local association after adjusting for the rupee-dollar parity and also keeping in view the consumer demand.
Agar recalled that gold skyrocketed this year following escalation of tensions between North and South Korea and also with the US in February.
Accordingly, gold hit the year’s peak at $1,347.20 an ounce (31.10 grams) in international markets on April 17.
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It was trading at $1,299 an ounce at the time of filing this report, which was almost a five-month low since December 2017.
Right now, there is no worrisome political development in Iran-US relations despite the fact that the latter has once again tightened sanctions on the former.
In addition to that, an extended recession in many European countries and slowdown in Chinese economy had also made gold less attractive for investors who were now showing excessive interest in the growing US dollar and many US stock markets, he said.
From the economic point of view, investors make investment in gold in the event of high inflation, which is not the case right now due to weak European economies.
‘If gold breaches the current technical resistance of $1,306-1,308 an ounce, then it may return to the uptrend in the current scenario,’ Agar forecast.
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All Sindh Saraf and Jewellers Association President Al-Haj Haroon Rasheed Chand said bullion had lost its shine in the eyes of investors and the common man as well.
‘For the wedding of their beloved family members and friends, people used to buy gold during Ramazan about five years ago,’ he said, adding now people had lost purchasing power and were buying artificial jewellery.
He was of the view that gold would have been cheaper by Rs2,000 per tola in Pakistan compared to its current price. However, the recent depreciation of the rupee made it costlier compared to international markets.
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The State Bank of Pakistan has let the rupee weaken by 9.5% to Rs115.61 against the US dollar in the inter-bank market in two rounds 5% in December 2017 and 4.5% in March 2018.
This article provided by NewsEdge.