Inflation, volatility of cryptocurrencies main reasons behind the rise
Gold’s price per tola jumped Rs3,300 in Pakistan during the week, according to the rates compiled by All Sindh Sarrafa Jewelers Association.
The gold price in the international market rose to $1,885 an ounce by the time this story was filed. On May 12, the precious metal was at $1,815 per ounce. Its international price affects the price 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.
AA Gold Commodities Operations Director Adnan Agar 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 $41,000 by the time this story was filed.
Agar says that inflation in the US was artificial and not due to 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 economy and stocks. The same happened when the coronavirus pandemic hit the world.
Agar says the gold price may go up to $1,890 an ounce in the international market before taking a correction. When the price of a commodity or a stock goes up, investors begin to sell it to make profit. In the process, the price comes down, which is known as correction.
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.
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.