Gold prices fell sharply in Pakistan on Wednesday, tracking losses in the international market as rising oil prices and renewed geopolitical tensions weighed on investor sentiment.
In the local market, the price of 24-karat gold dropped by Rs4,700 per tola to Rs430,236, according to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA). The decline came a day after gold had already slipped by Rs2,500 per tola to Rs434,936.
The price of 10 grams of gold also moved lower, falling Rs4,029 to Rs368,858.
Silver followed the same trend. Its price declined by Rs138, bringing the rate to Rs6,421 per tola.
The fall in local prices reflected weakness in the international bullion market, where investors reacted to fresh concerns about inflation and the outlook for US interest rates.
In global trading, spot gold was down 1.02 percent at $4,063.67 per ounce by 0850 GMT after touching its lowest level since July 2 earlier in the session. US gold futures for August delivery fell 1.97 percent to $4,074.80 per ounce.
The international gold rate used by Pakistan’s local market also dropped by $47 to $4,078 per ounce, including a premium of $20.
Market sentiment shifted after US President Donald Trump declared that the memorandum of understanding aimed at ending the recent conflict with Iran was “over”. His remarks pushed oil prices more than 5 percent higher as investors feared renewed instability in the Middle East and possible disruptions to energy supplies.
Higher oil prices can fuel inflation by increasing transportation and production costs across the economy. Persistent inflation may encourage the US Federal Reserve to keep interest rates elevated or raise them further. That is generally considered negative for gold because the precious metal does not pay interest, making it less attractive when borrowing costs and bond yields rise.
Investors are now waiting for the release of the Federal Reserve’s latest policy meeting minutes for fresh signals on the direction of interest rates.
UBS analyst Giovanni Staunovo said gold is likely to remain in a consolidation phase in the near term. He said weaker US employment data and lower inflation would be needed for policymakers to adopt a less aggressive stance on interest rates, which could provide support to gold prices.
Elsewhere in the precious metals market, spot silver fell 2.37 percent to $58.59 per ounce, while platinum lost nearly 3 percent and palladium dropped 3.9 percent. Meanwhile, China’s central bank reported its largest monthly increase in gold reserves in more than two and a half years during June, highlighting continued official demand despite recent price swings.
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