Gold price nosedives by Rs5,100 per tola in Pakistan

• Gold price settles at Rs140,500 per tola.
• Precious commodity loses value as rupee gains ground.
• Silver prices also decline in local market.

KARACHI: Gold prices dropped over 3% to a near two-and-a-half-month low on Tuesday as investors scrambled for cash to cover losses in other asset classes mainly driven by an appreciation of the rupee against the US dollar after the International Monetary Fund (IMF) approved the revival of Pakistan’s bailout programme.

In data released by the All Sindh Sarafa Association, the gold price plummeted by Rs5,100 per tola and Rs4,372 per 10 grams to settle at Rs140,500 per tola and Rs120,456 per 10 grams on Tuesday.

Bullion has on occasion moved in tandem with equities recently, especially as sharp sell-offs in wider markets force investors to sell precious metals to meet margin calls and cover their losses.

Gold, considered a safe store of value during political and financial uncertainty, has been facing tough competition from another safe haven, the dollar, in which it is priced. 

A stronger dollar makes gold expensive for holders of other currencies and while the greenback lost ground in the local market it has been strengthening against other currencies for the last many days.

The All Sindh Sarafa Association determines local prices based on rupee-dollar parity and international rates. According to market practice, local prices of gold usually go down on the rupee’s appreciation against the US dollar and rising prices of commodities in the international market.

In the international market, the price of the yellow metal gained $5 per ounce to settle at $1,733. Price remained subdued on expectations of more interest rate hikes by the US Federal Reserve.

It should be noted that the gold price stands below cost and is cheaper by Rs4,000 per tola compared to Dubai.

Meanwhile, silver prices in the domestic market receded by Rs10 per tola and Rs8.57 per 10 grams to settle at Rs1,520 per tola and Rs1,303.15 per 10 grams today.