Gold hits another record high level of 45,800 per tola

KARACHI: Gold lovers have once again been burdened with a steep rise in the yellow metal rates as it hit another record-high level of Rs 45,800 per tola in the local bullion market following the trend in the international market in which it touched the highest-ever level of $1,420 an ounce, analysts said on Monday.

The reasons for the increase in the gold rates in the international market are - euro dipped against the dollar and surge in inflation in the developing countries, they added. Around Rs 155 per tola increase was recorded in the local bullion market while in dollar terms, the increase was $15 per ounce, gold traders said.

Gold prices in the international market gained 18 percent in 2010, supported by investors and hedgers. Gold has always been a top priority for investors on back of better returns on securities besides hedging, Pakistan Gems and Jewellery Development Company (PJGDC) Director Shafi Choksi said. He said, “This is the serial increase as international investors are relying on gold buying due to its continuous increasing price,” he added. China and India also have sped up their buying and made difference in the market, besides new entrants in the gold market have also pushed its price at an all-time high level, Choksi said. He said gold would likely touch $1,460 to $1,480 on higher demand by leading gold consuming countries like India and China by the mid 2011.

He said, “Hedging in yellow metal will remain a basic feature this year as the prices of gold in Pakistan are still lower than in Dubai and this discourages the import on the domestic front, but still investors in the international and domestic markets seek an alternative to volatile currencies, equities and some sovereign bonds as economic data has cast doubt on the global growth outlook.” The increase in hedging is attributed to the fluctuating share markets and concerns over the increasing inflationary conditions in the country, he maintained.

He said gold’s attraction as an alternative investment had helped boost its price by over 25 percent in 2010 while it gained around 23 percent in 2009.

He said the domestic sale of gold registered a decline by around 78 percent in 2010, though the demand was still there on wedding season, but the customers curtailed volume of buying. Physical demand for gold picked up in India despite the fact that high prices discouraged consumers throughout the year.

The international investors including investors in Pakistan put money into gold on poor returns on investments and international economic recession.

The fundamentals are driving the price and those fundamentals remain fear-driven besides macro uncertainty, concerns over currency stability, medium-term inflation fears as the US Federal Reserve implements Quantitative Easing II, geopolitical tensions and low interest rates, international analysts opined. A weaker euro and consequently stronger dollar pressurises gold prices, but concerns over sovereign debt are set to support demand for the metal.

The strong inverse relationship between gold and the dollar weakened to such an extent last year that gold prices managed to rise nearly 30 percent at the same time that the dollar rose more than 6.5 percent against the euro.

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