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Price slump sparks interest among gold jewellery buyers

April 19, 2013

FARHAN ZAHEER

KARACHI

A sharp fall in gold prices over the last three weeks must have hurt many small and big investors who have gold in their portfolio, but at the same time it has generated much interest among people who have long been waiting for prices to come down and to buy gold jewellery.

Though the sudden drop in gold prices has caused excitement among intending investors, they are extremely cautious, fearing further fluctuations in the international market, analysts say.

Like other countries, gold rates in Pakistan move in tandem with international gold prices, an official of the Pakistan Mercantile Exchange (PMEX), the first and only online commodity futures exchange in Pakistan, said.

Apart from the global market, the other major factor that has an effect on domestic gold prices is changes in the value of rupee, he said.

“There is much excitement among gold investors, but they are mindful of the fact that the world market may further drop or rise sharply,” he said. “Investors are confused because gold prices may go up too much or may drop too much.”

The sudden fall in international gold prices has had a direct bearing on sales volume on the Pakistan Mercantile Exchange. On Friday last week, overall trading volume on PMEX jumped to Rs22 billion from an average of Rs6 billion mainly on the back of renewed interest among gold investors.

“Since we have general elections round the corner, we think the market would have low turnover, especially in gold. But the fact remains that gold prices in the domestic market take cue from the international market, rather than the country’s political scenario or sentiments,” the PMEX official said.

“Apart from the overseas market, my experience has taught me that domestic gold prices are directly linked to the exchange rate of rupee than local stock exchanges or political conditions in Pakistan,” Muzammil Aslam, Managing Director of Emerging Economics Research, said.

“When gold prices in Pakistan go down, our currency goes down against the US dollar. But when gold goes up, our currency remains stagnant.”

Last week in the international market, gold shed over $200 per ounce to touch the lowest level in two years. On Monday this week, gold plunged $140.30 to $1,361.10 an ounce, down 9%, the biggest decline in a day in the last 30 years. On Thursday, the market closed at $1,395 per ounce.

The price fall has sparked interest among jewellery buyers, who have become active in the market.

“The decline of Rs10,000 per 10 grams in the last three weeks has encouraged many jewellery buyers,” Haroon Rasheed Chand, President of All Sindh Saraf and Jewellers Association, said.

On Thursday, the gold market in Karachi closed at Rs46,285 per 10 grams and Rs54,200 per tola.

Most of the visitors in the Karachi Sarafa Market – the busiest gold market of the city – are those who want to buy jewellery, Chand said, adding it seems that investors are reluctant to make fresh purchases because of expected further fluctuation in prices.

http://tribune.com.pk/story/537385/price-slump-sparks-interest-among-gold-jewellery-buyers/

Published in The Express Tribune, April 19th, 2013.

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From → By Farhan Zaheer

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