Gold Drops 5,600 Rupees Amid Rate Hike Fears

Gold prices in Pakistan fell sharply on Friday. The rate of one tola declined Rs5,600 to Rs456,736. This drop happened despite a rebound in international bullion markets. Investors are assessing stronger US inflation data. Expectations of a Federal Reserve rate hike are rising.

Data from the All-Pakistan Gems and Jewellers Sarafa Association shows the 10-gram gold price decreased by Rs4,801. The new price stands at Rs391,577. On Thursday, gold had already fallen Rs600 per tola. The latest decline puts the domestic market under renewed pressure. Currency-linked pricing contributes to these fluctuations.

International markets show mixed signals

Spot gold rose 1.2% to $4,366.69 per ounce on Friday. The metal remained down around 1.4% for the week. This reflects continued pressure from expectations of tighter US monetary policy. US consumer inflation picked up in August. This reinforced market expectations of a rate hike.

Traders are pricing in an 87% chance of a rate hike in September. Higher interest rates generally weigh on gold. This increases the opportunity cost of holding the non-yielding asset. However, persistent inflation and geopolitical uncertainty can provide support.

Fed decision will determine direction

Adnan Agar of Interactive Commodities noted gold fluctuated between $4,292 and $4,402. The market later traded around $4,360. He stated US inflation was in line with forecasts. This triggered nearly $100 movement in gold prices. Agar identified $4,300 and $4,400 as key levels.

Buying tends to emerge near the lower level. Profit-taking sets in around the upper end. The Federal Reserve's monetary policy decision on Wednesday is critical. A rate hike with a dovish tone could keep gold range bound. A hawkish statement could initially push bullion lower.

Silver and currency movements

Silver prices in Pakistan also declined. The price fell Rs253 to Rs6,871 per tola. The Pakistani rupee gained Rs0.03 against the US dollar. It closed at 277.32 compared with 277.35 a day earlier. GN auto markets/commodities: gold prices tracks these shifts closely.