ISLAMABAD: Gold price in the country staged a deep correction this week, declining to its multi-week lows of Rs211,000 per tola amid a dip in international bullion prices despite rupee’s depreciation against the US dollar.
Gold price in the country decreased by Rs3,600 (-0.61 percent) per tola on a week-on-week basis as the gold rate for a single tola of 24-karat on a week-on-week (WoW) basis decreased to Rs211,000 from Rs214,600, according to Karachi Sarafa Market. Similarly, the price of 10 grams of 24-karat gold closed at Rs180,898 against Rs183,985 at the start of the week, reflecting a loss of Rs3,087. In global markets, gold closed the week at $1,939 per ounce against $1,992 in the preceding week, showing a week-on-week decrease of $53 (-2.66 percent) for the second straight week.
The Pakistani rupee extended losses against the US dollar for the third consecutive week and depreciated by 0.96 percent in the interbank market and 1.06 percent in the open market. The rupee depreciated by Rs2.72 (-0.96 percent) to Rs287.03 versus US dollar in the interbank market, while slipped to 285-288 in the open market from 282-285 during the week, going down by Rs3 (-1.06 percent). Since gold is denominated in the US dollars, when the local unit depreciates against the greenback, the value of gold in the local market increases if all other factors remain the same.
In the international market, gold staged a deep correction this week, declining to its lowest level in nearly a month below $1,940, after several failed attempts to stabilize above $2,000 earlier this month. The Federal Reserve’s cautious policy outlook and the disappointing October jobs data from the US forced the US dollar (USD) to suffer heavy losses against its rivals in the previous week. In the absence of fundamental drivers on Monday, the USD managed to erase some of its losses and caused the gold price to edge lower.
The benchmark 10-year US treasury bond yield declined to 4.5 percent and the USD struggled to continue to outperform its rivals. Gold price, however, stood on the back foot as well and extended its slide. The data from China, the biggest gold consumer in the world, showed that the trade surplus narrowed to $56.5 billion in October from $77.71 billion in September. This reading missed analysts’ estimate for a surplus of $81.9 billion and weighed on gold.
From a technical perspective, the Relative Strength Index (RSI) indicator on the daily chart retreated to 50, reflecting the loss of bullish momentum in gold price. Significant support seems to have formed in the $1,925-$1,930 area, where the 200-day Simple Moving Average (SMA), 100-day SMA and the 50-day SMA converge. If gold falls below that area and starts using it as resistance, $1,900 (psychological level) could be set as the next bearish target before $1,875 (static level).
On the flipside, $1,960 aligns as immediate resistance before $1,975 (20-day SMA). A daily close above the latter could attract buyers and open the door for an extended rebound toward $2,000 (psychological level). – TLTP