Gold prices in Pakistan fell on Tuesday, shedding Rs3,600 per tola as the precious metal weakened in the international market amid rising oil prices and renewed concerns about inflation.
The price of gold dropped to Rs435,436 per tola, according to rates released by the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA).
The price of 10-gram gold also declined, falling by Rs3,086 to Rs373,316.
The latest drop came after local gold prices remained unchanged on Monday at Rs439,036 per tola.
In the international market, gold lost $36 to settle at $4,129 per ounce, according to the association.
Silver prices, however, remained steady in Pakistan, holding at Rs6,234 per tola.
Why are gold prices falling?
International gold prices came under pressure on Tuesday as rising oil prices fuelled inflation concerns and investors looked ahead to the US Federal Reserve’s next policy meeting for clues about interest rates.
Spot gold fell 0.4 percent to $4,123.94 per ounce by 0800 GMT, while US gold futures for December delivery slipped 0.4 percent to $4,142.70.
Higher oil prices have added to concerns that inflation could remain stubborn, potentially prompting the Federal Reserve to keep interest rates elevated for longer.
Oil prices climbed as traders factored in geopolitical risks following attacks claimed by Yemen’s Iran-aligned Houthi group against Saudi energy, airport and military targets. Brent crude hovered near a five-month high.
Gold is often viewed as a hedge against inflation. However, higher interest rates can make the metal less attractive because it does not pay interest, increasing the opportunity cost of holding it.
Kyle Rodda, senior financial market analyst at Capital.com, said renewed tensions in the Middle East had pushed oil prices higher, weighing on gold at the start of the week.
Investors watch the Federal Reserve
Market attention is now turning to the Federal Reserve’s policy meeting scheduled for October 27 and 28, with investors looking for clues about the direction of US interest rates.
Recent comments from Fed officials have suggested little urgency for further monetary tightening, easing some expectations of an immediate rate hike.
However, traders continue to anticipate tighter policy later in the year. According to the CME FedWatch Tool, markets were pricing in a 91 percent chance of a rate hike in December.
The outlook for interest rates remains an important factor for gold, as expectations of higher borrowing costs can weigh on demand for the non-yielding metal.
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