Gold edges higher in Pakistan on depreciating rupee

• The precious commodity gains Rs350 per tola and Rs300 per 10 grams to settle at Rs124,000 per tola and Rs106,310 per 10 grams.
  
• Analysts believe that investors are afraid of inflation going out of control and are therefore buying gold to hedge against that risk.
• In the international market, the bullion edges higher by $1 per ounce to close at $1,781 per ounce.

KARACHI: The price of gold in Pakistan gained on Tuesday as inflation worries and a depreciating rupee boosted demand for the safe-haven metal.

The precious commodity gained Rs350 per tola and Rs300 per 10 grams to settle at Rs124,000 per tola and Rs106,310 per 10 grams, respectively.

Analysts believe that investors are afraid of inflation going out of control and are therefore buying gold to hedge against that risk.

However, local dealers highlight that domestic demand for the yellow metal is flat in the domestic market.

Pakistan meets almost all its gold demand through imports, and traders follow its international price in setting rates in the country. Jewellers import the metal against the US dollar and UAE dirham before converting its price into rupees.

In the international market, the bullion edged higher by $1 per ounce to close at $1,781, supported by a softer greenback, though firmer US Treasury yields and expectations that the Federal Reserve could tighten policy more aggressively capped gains of the non-yielding asset.

Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes tend to push government bond yields up, dimming bullion's appeal.

Friday's US Consumer Price Index report could be crucial in gauging the US Fed's next move.

"Gold should slowly tread lower on the prospect of tighter policy and if CPI comes out hotter than expected, that's only going to lead to a more aggressive Fed being priced in," said IG Markets analyst Kyle Rodda.

Meanwhile, silver prices in the domestic market remained unchanged at Rs1,460 per tola and Rs1,251.71 per 10 grams.

— With additional input from Reuters