Gold prices fall sharply in Pakistan as global market weakens

ISLAMABAD: Gold prices dropped steeply in Pakistan on Wednesday, mirroring losses in the international market as bullion came under pressure from concerns that conflict-led inflation could keep interest rates higher for longer. Investors were also watching worsening tensions in the Middle East and awaiting upcoming US economic data.

According to the All-Pakistan Gems and Jewellers Sarafa Association, the price of gold in the local market fell by Rs8,600 per tola to Rs467,762. The rate for 10 grams also declined by Rs7,373, settling at Rs401,030.

The fall came a day after gold had climbed to Rs476,362 per tola following an increase of Rs4,600, underlining continued volatility in domestic and global bullion trading.

Silver also recorded a decline in Pakistan, with the local price slipping by Rs259 per tola to Rs7,894.

International market under pressure

In global trade, spot gold was down nearly 1% at $4,440.99 per ounce by 1742 GMT, while US gold futures ended 1.2% lower at $4,466.90, according to Reuters.

Analysts linked the decline to changing expectations about monetary policy. Investors are increasingly pricing in the possibility that persistent inflation, partly driven by conflict-related disruptions, may delay interest rate cuts in major economies, especially the United States.

David Meger, Director of Metals Trading at High Ridge Futures, said geopolitical developments were a major driver of gold trading.

"Gold's activity is largely driven by heightened tensions between the US and Iran," he added. "As the conflict intensifies, rising energy prices are expected to lift inflation expectations. This could lead to higher interest rates, further strengthening the dollar and causing additional downward pressure on gold."

Gold is often treated as a hedge against inflation, but higher interest rates can reduce its appeal because it does not offer a yield. At the same time, oil prices moved up and the US dollar index posted a third consecutive session of gains. A stronger dollar makes metals priced in the US currency costlier for buyers using other currencies.

Despite rising regional tensions, the market reaction remained mixed. Demand for safe-haven assets such as gold was offset by expectations of a firmer dollar and concern that a prolonged conflict could keep global borrowing costs elevated for longer. Traders noted that the push and pull between geopolitical risk and tighter monetary expectations was adding to sharp swings in bullion prices.

Silver tracked gold's downward move in the international market as well, reflecting softer industrial and safe-haven demand.

Separately, the Pakistani rupee inched up against the US dollar in the inter-bank market, gaining Re0.01 to close at 278.45 compared with 278.46 a day earlier.