Gold rebounds with significant gains, PKR strengthens against Dollar

KARACHI: Gold prices saw a notable surge on Friday, with the price of one tola rising by Rs 2,500 to close at Rs 526,462, while 10 grams of gold saw an increase of Rs 2,144, reaching Rs 451,356. This uptick follows a sharp decline earlier in the week when geopolitical developments and a stronger US dollar dampened demand for gold as a safe-haven investment.

On the currency front, the US dollar exchange rate closed 1 paisa cheaper in the interbank market, settling at Rs 279.56, according to the State Bank of Pakistan (SBP). Despite the dollar’s slight depreciation, the overall outlook for gold remains closely tied to shifting market dynamics and investor sentiment.

Earlier in the week, gold prices plummeted as global markets reacted to signs of progress in diplomatic talks between the United States and Iran, easing geopolitical risks. Additionally, a stronger US dollar further pressured gold prices. Spot gold fell more than 2 per cent, dipping below key psychological levels, while gold futures for April delivery also posted significant losses. Silver and other precious metals mirrored this decline, reflecting broader selling trends across commodity markets.

Analysts suggested that the market’s response pointed to a shift in investor sentiment, as demand for safe-haven assets waned with the prospect of reduced geopolitical tensions. Diplomatic talks between the US and Iran have yielded positive developments, with both sides reaching a preliminary understanding on key issues related to Iran’s nuclear program. While a final agreement is still pending, this progress has helped assuage fears of conflict, contributing to the drop in gold prices earlier this week.

The stronger US dollar, which appreciated against major currencies, also played a critical role in pressuring gold. A firmer dollar makes gold more expensive for international buyers, dampening demand for the precious metal. This relationship between the US dollar and gold prices is particularly evident in times of shifting currency conditions, as investors turn to yield-bearing assets when the dollar strengthens.

Despite the earlier setback, the market has begun to show signs of recovery. The sharp rebound in gold prices on Friday reflects a cautious optimism that geopolitical risks may not intensify further and that the broader macroeconomic environment remains supportive of gold’s value. Investors are also closely monitoring upcoming US economic data, including inflation readings and Federal Reserve minutes, as these will provide critical insights into the future direction of interest rates.

As the market digests these developments, gold remains a barometer for both economic indicators and shifts in geopolitical sentiment. A confirmed diplomatic breakthrough, coupled with data suggesting a potential slowdown in rate hikes, could lend further support to gold prices in the coming months. Conversely, renewed geopolitical tensions or surprises in economic data could quickly reverse the recent rebound.