Gold outshines silver in domestic bullion amid rising demand

May 31, 2023

May 31, 2023 (MLN): Domestic bullion continued to shine on Wednesday, with 24-karat gold reaching Rs234,400 per tola, inflating by Rs1,600.

According to the Karachi Sarafa Association, the price of 10-gram 24-karat gold reached Rs200,960 per tola, surging by Rs1,372.

While 10-gram 22-karat gold stood at Rs184,214 per tola.

However, the price of silver diminished in the domestic market, with 24-karat silver falling by Rs50 to close at Rs2,800 per tola, and the price of 10-gram 24-karat silver reaching Rs2,401 per tola, falling by Rs42.87.

On the other hand, international spot gold is currently trading at $1,964.50 up by 0.31% on the day.

However, gold is heading towards the first red monthly close in three months.

This is attributed to the latest U.S. inflation data which came in higher than expected and market participants are now pricing in another interest rate hike.

The CME Fed watch tool is showing a 62% chance of a 25 bps hike in the central bank's June 13-14 meeting, with rate cuts being priced out for the second half of the year.

Edward Gardner, commodities economist at Capital Economics stated that "Gold will probably remain at its current level over the next few days as safe haven demand related to uncertainty about the debt ceiling persists," as reported by Reuters.

Interest rates and gold have an inverse relationship, as in an environment of high-interest rates, gold loses its attractiveness.

Moreover, the U.S. dollar index (DXY) has also continued to rise, currently 0.44% higher on the day, this makes dollar-denominated gold expensive for investors holding other currencies.

Notably, yesterday international spot gold prices witnessed a sharp gain.

The sharp uptick in gold prices was attributed to the Ukrainian drones that struck Moscow yesterday.

One Russian politician called it the worst such attack since World War Two, while Kyiv was also hit by air for the third time in 24 hours.

A video shared on social media showed an explosion followed by a column of smoke rising into the sky.

International spot gold was down by 0.6% yesterday before Ukraine tensions started to develop.

But due to the safe haven nature of the yellow metal, it marked a sharp increase erasing all the losses and turning green on the day in just three hours after the news.

Market participants are also closely monitoring the upcoming U.S. Non-farm payrolls (NFP) figures for June due to be released on Friday.

Meanwhile, international spot silver is currently trading at $23.21, with an increase of 0.09% on the day.