Gold shines as dollar strengthens

KARACHI: Gold has maintained an upward trend, hovering around an all-time high hit this week in the wake of rupee depreciation in Pakistan. The uptrend in the country is in contrast to the downturn in the global commodity at world markets.
The price of gold has increased by Rs750 per tola (11.66 grams) to Rs150,850 in Pakistan on Thursday. This is just Rs300 away from an all-time high hit at Rs151,150 on Tuesday.
The All Pakistan Sarafa Gems and Jewellers Association (APSGJA), which determines the bullion price for domestic markets every day, confirmed that “The latest price increase was announced following a fresh depreciation of the rupee against the dollar. The London market saw a brief spike of $23 per ounce (31.10 grams) to $1,725 in the evening.”
While the commodity receded to $1,707 per ounce at the world markets, it remained unchanged and close to a record high in Pakistan. The last time the international market hit all-time high of $2,077 per ounce was in the middle of 2020, when the global economy was facing lockdown amid the Covid-19 pandemic.
Following the strengthening of the US dollar, gold has moved in the opposite direction at the global markets. While gold has surpassed $1,800 per ounce mark several times at the global markets, and even touched over $1,900 per ounce between 2020 and the recent past, it failed to sustain itself on the higher side. In Pakistan, however, it seems that the larger the depreciation in the rupee at domestic “open markets” – compared to interbank market – the higher the price of gold.
Speaking to the Express Tribune, APSGJA member Abdullah Abdul Razzak Chand explained, “We determine the price of gold keeping in view the dollar value at the open market.” The dollar is almost Rs10-12 more expensive at commercial banks as compared to the interbank market.
“We finance gold imports by buying dollars from the open market (commercial banks),” says Chand. More importantly, the rupee has depreciated by 10% in the current fiscal year 2023 (July 1, 2022 to date) to Rs225.42 against the US dollar at the interbank market. In the previous fiscal year (FY22), it dropped by 30% to Rs205.
“Pakistan meets its domestic demand for gold via imports, as it does not produce the metal locally. At present, however, the country is importing a very small volume of bullion since the government has imposed tight conditions on imports to save foreign exchange reserves,” he said.
Explaining why gold is unable to sustain itself on higher ground at the world market against a strong dollar he said, “The US Federal Reserve started tightening its monetary policy by increasing its benchmark interest rate.”-Agencies