Gold Prices Reverse Decline After Pakistan’s Inflation Breaks 47-Year Record

Today (Wednesday), gold prices in Pakistan reversed yesterday’s losses after the Pakistani Rupee fell against the US dollar in interbank trade amid a tense round of talks with the International Monetary Fund (IMF).

The price of gold (24 carats) increased by Rs. 3,500 per tola, according to data released by the All-Pakistan Sarafa Gems and Jewellers Association (APSGJA), to settle at Rs. 205,000. Similarly, the price of a gramme of gold rose by Rs. 3,000 to Rs. 175,754.

Today’s gold surge is attributed to the rupee’s reversal following talks between Pakistan and the IMF on contingency measures to generate an additional Rs. 300 billion in tax revenue for the remainder of the current fiscal year.

The increase in bullion prices coincides with increased demand for the rare metal, as Pakistan’s inflation reached a 47-year high of 27.6 percent due to food supply constraints and a significant increase in the price of petroleum products.

Spot gold was up 0.11 percent in international markets after falling $10 in the early hours of trade today. Bullion fell to $1,922.50 per ounce at 10:40 AM before regaining ground and rising to $1,933 at 18:10 PM. Similarly to Tuesday’s trends, gold prices were initially under pressure due to the strengthening dollar and rising speculation about the US Federal Reserve’s rate decision and policy statement, which is scheduled to be released later today.

In any case, the US dollar may weaken and bond yields may fall as a result of the US rate hike, but gold appears to have priced in much of this risk early on and may rise by the weekend.

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