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Marrying off your child may cost more this season as gold prices reach historic high

A tola of gold became Rs1,600 more expensive in just two days and now costs Rs67,950

SAMAA | - Posted: Dec 20, 2018 | Last Updated: 3 years ago
Posted: Dec 20, 2018 | Last Updated: 3 years ago

A tola of gold became Rs1,600 more expensive in just two days and now costs Rs67,950

Photo: AFP

If you are marrying off your daughter this season, you might want to consider buying her artificial jewelry because gold prices have reached a historic high in a matter of months.

The prices of gold have appreciated sharply this week, gaining Rs1,600 in just two days, and reached a historic high of Rs67,950 per tola, according to data compiled by the All Sindh Saraf and Jewellers Association.

“High prices are a function of rupee deprecation,” the association’s president Haroon Rasheed Chand told SAMAA Digital. He said Pakistan imports gold in dollars so when the dollar goes up, gold prices also go up.

Just like petrol prices, Pakistan also decides gold prices based on price movements in the international market and fluctuation in the dollar rates as well as the market forces of demand and supply.

The rising gold prices are in line with the international trend as gold futures are trading at a five-month high of $1,250 per ounce. On the other hand, the rupee has depreciated more than 25% against the dollar this year.

Related: Gold prices shoot up to historic high

These factors have been determining local bullion prices. For example, gold prices have increased by 10% in the last three months to Rs67,950 per tola, up from Rs61,500 as of October 20. The trend may hold for a while given the uncertainty around the rupee-dollar exchange rate.

“I think this rise is temporary. The dollar is rising and may touch Rs150 but it will then come down and the gold prices will follow suit,” Chand said. When it comes to demand, the ASSJA’s president said people’s purchasing power has decreased significantly and there is a decline in local sales as well. This is despite the wedding season, which usually results in higher purchases, being in full swing.

Another factor that may bring international gold prices down is the interest rates set by the American central bank, the Fed. When the Fed increases interest rates, investors move away from gold to the money market, which offer higher profits. This causes a reduction in the demand for gold and puts downward pressure on its price. On Wednesday, the Fed increased its interest rate by 0.25%, but it revised its forecast for further hikes, downward from two hikes next year as opposed to the three it planned earlier.

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