Gold prices petered out in Pakistan Monday as overstrung safe-haven investors preferred to sit tight amid the imposition of taxes and reversal of subsidies by the government to win back the International Monetary Fund’s (IMF) loan programme.
Data released by the All-Pakistan Sarafa Gems and Jewellers Association (APSGJA) showed that the price of gold (24 carats) decreased by Rs800 per tola and Rs686 per 10 grams to settle at Rs197,600 and Rs169,410, respectively.
Dealers said an acute downtrend in sales could further pull the prices lower, but dwindling demand for gold imports could help shrink country’s yawning trade deficit and prop up a rickety rupee.
As the Pakistan rupee trades around 269-275 against the dollar in the interbank market, the yellow metal can get much costlier as the nation meets its gold requirements through imports — and the country is already facing a balance of payment crisis.
Gold prices eased on Monday, pressured by a firmer dollar as traders squared positions before the U.S. inflation data, which could influence the Federal Reserve’s roadmap for interest rate hikes, comes out on Tuesday.
Spot gold was down 0.1% at $1,863.38 per ounce, as of 0653 GMT US gold futures inched up 0.1% to $1,876.90.
Bullion is often seen as a hedge against inflation, but the opportunity cost of holding it rises when interest rates are increased to bring down inflation.
“A firmer US dollar and higher Treasury yields continue to put gold prices under pressure as expectations of a prolonged disinflation story are being challenged,” said Yeap Jun Rong, a market analyst at IG.
The dollar index edged up 0.1%, making greenback-priced bullion more expensive for buyers holding other currencies. Benchmark 10-year note yields hovered near their highest level since Jan. 6.
