Gold prices in Pakistan dropped sharply on Friday, tracking a decline in the international market as a stronger US dollar and rising global inflation concerns continued to weigh on bullion.
According to the All Pakistan Gems and Jewellers Sarafa Association (APGJSA), the price of gold fell by Rs3,600 per tola to settle at Rs421,836.
The price of 10 grams of gold also moved lower, declining by Rs3,086 to Rs361,656.
The latest fall reversed Thursday’s modest increase, when the price of gold had risen by Rs400 per tola to reach Rs425,436.
In the international market, gold prices also came under pressure. The international rate used by local dealers fell by $36 to $3,994 per ounce, including a premium of $20.
Silver prices followed the same trend. The price of silver dropped by Rs126 to Rs6,029 per tola in the local market.
Globally, spot gold traded around $3,970 an ounce on Friday and remained close to its lowest level since July 1. The precious metal is on course for its biggest weekly decline in six weeks, with prices down more than 3 percent over the week. US gold futures also slipped 0.5 percent.
Market analysts said a stronger US dollar and growing concerns that rising oil prices could push inflation higher have reduced demand for gold. A stronger dollar makes bullion more expensive for buyers using other currencies, while higher inflation expectations have strengthened the case for tighter monetary policy.
The recent escalation in the conflict between the United States and Iran has also driven oil prices sharply higher. Brent crude has gained more than 14 percent this week after renewed attacks, raising fears that inflation could stay elevated for longer.
Higher interest rates usually reduce the appeal of gold because the metal does not offer any yield. Traders are now assigning a better than 50 percent chance of a US interest rate hike in September, while recent comments from Federal Reserve Vice Chair Philip Jefferson also signalled that further rate increases remain possible if inflation does not ease.
Despite the recent weakness in prices, Goldman Sachs said geopolitical uncertainty could encourage more private investors to increase their exposure to gold as part of broader portfolio diversification.
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