Gold buyers in Pakistan received unexpected relief on Wednesday as prices dropped sharply for the third straight session, following another decline in the global bullion market.

The latest decline could encourage buyers who had delayed purchases due to record-high prices in recent weeks.

Why prices are falling

The drop in gold prices comes as investors are kept in the dark over global interest rate decisions and rising geopolitical tensions in various parts of the world.

The All-Pakistan Gems and Jewellers Sarafa Association said the price of gold per tola in the local market declined Rs5,500 to Rs479,562. The price of 10 grams of gold also decreased by Rs4,715 to settle at Rs411,147. The latest slump comes after the pressure seen in Pakistan’s domestic gold market.

The market had already shown its fragility a day before when the price of gold per tola fell by Rs8,900 to Rs485,062. The consecutive fall indicates that the gold prices are still very sensitive to the changes in the international market.

Spot gold was down nearly 1 percent at around $4,550 per ounce during the day globally. Gold futures also declined in the United States as traders awaited the latest policy decision from the US Federal Reserve. Investors are watching closely for a hint from the central bank on whether it will keep interest rates unchanged or signal a different direction in the next few months

Investor behaviour is also being affected by inflation concerns and tensions in the Middle East, according to market experts. Gold still has technical support at lower levels, some analysts believe, which may give prices a cushion to bounce back if market sentiment improves.

In Pakistan, silver prices also fell marginally as the cost of silver per tola declined by Rs45 to Rs7,766.

However, global demand for gold rose 2 percent in the first quarter of the year, despite the recent fall, showing that investors' appetite for the precious metal remains strong. What happens next?

Analysts believe that the future of gold prices will be largely determined by international monetary policy and political developments in the coming days.

Meanwhile, the Pakistani rupee remained almost unchanged against the US dollar in the inter-bank market, closing at 278.80 compared to 278.81 in the previous session.

With international markets remaining unstable, buyers and investors in Pakistan will now be watching closely to see whether this decline continues in the coming days.

Credit: Independent News Pakistan (INP)