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Gold hits a record high, what’s next?

SAMAA | - Posted: Aug 5, 2020 | Last Updated: 2 months ago
SAMAA |
Posted: Aug 5, 2020 | Last Updated: 2 months ago
Gold hits a record high, what’s next?

Photo: AFP FILE

The price of gold surged in Pakistan by Rs4,800 Wednesday, setting a new high of Rs128,700 per tola, according to the All Sindh Sarafa Jewelers Association.

The precious metal has recorded an increase of 46% in its price since January 1, when a tola costed Rs88,150. Gold prices have been increasing in the international market following a surge in coronavirus cases in the United States. They have now peaked above $2,000 an ounce.

According to fxstreet.com, there were two key reasons behind the increase in the yellow metal’s price: first being the persistent weakness in the US dollar, as the US Treasury yields (profit rates of American short-term securities) sit at record lows and the second being a deadly explosion in Beirut that further boosted the demand for gold.

Investors have been pouring money into gold which has pushed the price of the precious metal to its highest in the world.

One of the major reasons of the increase in gold prices is that investors are reluctant to take risks due to threats posed by a second wave of COVID-19. It is expected that there would be a spike in coronavirus cases as the world economies begin to reopen. Even the countries like China are on a buying spree for the bright metal, according to Akhtar Tessori, the chairperson of All Pakistan Gem and Jewellery Traders and Exporters Association.

Gold may reach $2,200 per ounce by Christmas, the BBC quoted Peter McGuire from XM.com as saying.

However, any major development relating to Covid-19 vaccine could keep the prices in check and may slow down the rally.

“Gold is under-cost in Pakistan compared to its international prices,” says Habib ur Rehman, ex-chairman of the All Pakistan Gems Merchants & Jewellers Association. “The gold price was expected to rise in the coming years because the US economy was expected to collapse, but COVID-19 pandemic caused this rise in gold prices earlier.”

The price of gold will rise further in the coming months, according to Rehman.

Another major reason for the increase in gold prices is the US-China trade war. China has reduced its agriculture and poultry imports from US. Both countries ordered the closure of each other’s consulates in Houston and Chengdu amid espionage allegations. If the relationship between both countries gets back on track, then there may not be such a hike in the gold price.

Adnan Agar, the COO of Rays Commodities, says that people are concerned and therefore they are opting for investment in gold, which is considered a safe haven in uncertain times.

The number of investors flocking to the safe-haven metal increased because of a weak dollar, which has fallen to its lowest level in over a year.

Negligible interest rates in major countries have also made gold all the more attractive to investors as they will not be getting much by putting their money in government securities.

In addition, the US elections scheduled for later this year have also been increasing anxiety of investors and adding to this uncertainty.

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