ISLAMABAD
Gold prices in the country snapped a two-week winning streak and slipped by Rs150 (-0.07 percent) per tola on a week-on-week basis.
The gold rate in Pakistan for a single tola of 24-karat on a week-on-week (WoW) basis decreased to Rs223,650 from Rs223,800, according to the data provided by All Pakistan Sarafa Gems and Jewellers Association (APSGJA).
Similarly, the gold rate for 10 grams of 24-karat inched down to Rs191,750 from Rs191,880 on WoW basis, showing a decrease of Rs130. Likewise, the 22-karat gold rates for one tola decreased to Rs206,400 and for 10 grams came down to Rs176,950 during the week.
The major reason for the decrease in prices in the local market is because of the international rates as well as PKR-USD parity. Gold prices in Pakistan are significantly influenced by the fluctuations in the global rates. As a result, any changes in the international market can have a direct impact on the local gold prices. The gold rate has been volatile in Pakistan recently amid continued political and economic uncertainty, and high inflation. The people prefer to buy this precious commodity in such times as a safe investment and a hedge.
On the other hand, the US dollar and gold price go inverse, as if the dollar weakens then gold rises and vice versa. In our case, if the Pakistani rupee strengthens against the US dollar, gold prices come down and vice versa. The Pakistani rupee made minor gains against the US dollar last week, rising by 0.13 percent in the interbank market and 1.02 percent in the open market.
In global markets, gold closed the week at $1,959.40 against $1,960.90 in the preceding week, showing a week-on-week decrease of $1.50 (-0.08 percent). Gold price made a u-turn in the second half of the week and dropped toward $1,950 after rising above $1,980 as upbeat data releases from the US pushed back against market expectations for a no-change in Federal Reserve (Fed) policy rate for the rest of the year. Gold price, however, erased a large portion of its weekly losses on Friday as the US dollar lost its appeal.
Gold started the week in a quiet manner amid a stronger dollar and stayed under modest bearish pressure on Monday and Tuesday as participants refrained from taking large positions ahead of the Fed’s policy announcements. Chairman Fed Jerome Powell during the post-meeting press conference refrained from confirming another rate hike later in the year, triggering a sharp decline in US Treasury bond yields and resulting in bullish momentum in gold price that climbed above $1,980.
However on Thursday, the 10-year US Treasury bond yield surged above 4pc following the Gross Domestic Product (GDP) of the US expanded at an annual rate of 2.4pc in the second quarter. Moreover, weekly Initial Jobless Claims declined to 221,000 from 228,000. Consequently, the gold price fell below $1,950 and erased all the post-Fed gains on Thursday. On Friday, inflation data in the US fell to 3pc on a yearly basis in June from 3.8pc in May, causing the US T-bond yields to retreat and helping gold price to retrace a portion of its weekly decline.
From technical perspective, the Relative Strength Index (RSI) indicator on the daily chart started to edge higher after dropping to 50 on Thursday, suggesting that investors remain reluctant to bet on a steady decline in gold price. On the upside, the 100-day Simple Moving Average (SMA) and the 20-week SMA form strong resistance at $1,970. Looking south, an important support area is located at $1,945/$1,950, where the 20-day SMA and 50-day SMA meet.
