The gold price continued to shoot up and soared Rs4,800 to Rs128,700 per tola on Wednesday, taking cue from a surge in international bullion rates.
Cumulatively, in the past three trading sessions (since July 31), the price of gold has increased Rs5,950, according to the All Sindh Saraf and Jewellers Association.
Speaking to Pak Revenue, Mafa Capital CEO Adnan Agar cited the prevailing economic crisis as the main reason behind the uptrend in gold prices.
Major economies around the world including the US and many European countries have injected stimulus packages to combat the impact of Covid-19, which have lifted gold prices upwards.
On the other hand, the US dollar has weakened substantially, which has further fuelled the rally in gold.
“Though the dollar remains largely stable against the rupee in the domestic market, it is losing ground in the rest of the world, triggering a flight to safe-haven assets such as gold,” he said. Pakistan is a net importer of gold, hence, a rise in international markets translates into an increase in prices in the domestic market.
Moreover, interest rates in major European economies were either close to zero or exactly zero and that also lifted gold prices, Agar said.
“Low or zero interest rates are favourable for gold prices, hence, the precious metal is rising in global markets,” he said.
Arif Habib Commodities Managing Director and CEO Ahsan Mehanti said geopolitical tensions, particularly after the blast in Lebanese capital Beirut, had added to uncertainty in the global market, which pushed investors to flee to safe havens such as gold.
“Due to looming uncertainty, safe-haven commodities including gold have turned bullish, encouraging investors to invest higher sums in them,” he said.
Global bullion market
Gold prices soared to a record high in the global market on Wednesday as a weakening dollar, falling returns on US bonds and a break above historic resistance of $2,000 an ounce added momentum to buying by investors seeking a safe store of value.
As the Covid-19 pandemic has roiled markets, gold has gained nearly 35% this year and is one of 2020’s best-performing assets.
Gold set a new record after scaling $2,000 for the first time on Tuesday, as investors seek a store of value on fears government stimulus in response to the pandemic will trigger inflation, devalue other assets and keep bond yields low. Spot gold prices rose 1.1% to $2,039.59 an ounce, after earlier reaching a record $2,055.10. US gold futures hit a record $2,070.30 and settled up 1.4% at $2,049.30.
Weakness in the dollar, which fell back towards recent two-year lows, and falling US yields have encouraged investors to look for an alternative store of value – boosting the appeal of gold.
“What we’re seeing at the moment with the dollar, bond yields and gold are macro trades of concern – not just about the coronavirus but also about the fiscal cliff in the US,” said Seema Shah, chief strategist at Principal Global Investors in London.