The gold price in the international market rose to $1,904 an ounce by the time this story was filed. Only two weeks ago, on May 12, the precious metal was trading at $1,815 per ounce. Its international price affects the prices in the local market.
The metric used to quantify gold in the international market is ounce while tola is used in Pakistan and the rates are quoted respectively. A tola is approximately one-third of an ounce.
Adnan Agar, who is the operations director of AA Gold Commodities, says the volatility of cryptocurrencies, especially bitcoin, and inflation in the US have pushed the gold price up.
“These two were the major developments last week,” he said.
Bitcoin lost nearly $26,000 in value in less than two weeks as it fell from $58,000 on May 11 to as low as $32,000. The cryptocurrency slightly recovered to $40,000 by the time this story was filed.
Agar says that inflation in the US was artificial and didn’t occur because of an increase in economic activities as normally happens. “The inflation is due an injection of the stimulus packages worth $9 trillion given in the aftermath of the pandemic especially in the US.”
These stimulus packages weakened the dollar, which was also why gold went up.
The prices of gold and other precious metals go up during uncertain times such as wars and disasters as they are considered safe havens for investment. Their prices fall when stable times are expected ahead. Investors turn to gold when things don’t look in favour of the economy and stocks. The same happened when the coronavirus pandemic hit the world.
On the other hand, when the economy starts improving, investors move to the capital market from gold and other metals. The situation in the US, the biggest economy of the world, plays an important role in influencing gold prices globally.
Agar believes that the gold price is “overweighed”. This means a correction can be expected soon. When the price of a commodity or stock goes up, investors begin to sell it to make profit. In the process, the price comes down, which is known as correction.
The analyst, however, said the gold price may go down to $1,850, taking a correction before rebounding to as high as $1950. He said that cryptocurrencies are volatile and investors have started investing in gold too.
The price of gold started going up internationally as countries across the world went into lockdowns in March 2020. It rose from $1,471 to reach an all-time high of $2,063 an ounce by August 6, 2020.
The per tola price in Pakistan peaked to Rs132,000 at the time.
