Gold loses shine, price drops by Rs250 per tola

• Decline comes after SBP raised its interest rate as higher rates raise opportunity cost of holding non-interest-bearing metal.
• Bullion price in the local market records a decrease of Rs214 per 10 grams.
• Silver prices in the domestic market remain unchanged at Rs1,460 per tola and Rs1,251.71 per 10 grams.

KARACHI: The price of bullion recorded a decrease of Rs250 per tola in Pakistan to settle at Rs124,450 per tola — in line with the trend in global markets — after the State Bank of Pakistan (SBP) raised the policy rate by 100 basis points to 9.75%.

The yellow metal also recorded a decrease of Rs214 per 10 grams in the domestic market to settle at Rs106,696 per 10 grams.

The decline in prices comes after the State Bank raised its benchmark interest rates. Gold — often viewed as an inflation-hedge — had so far benefited from low-interest rates. 

A hike in rates will reduce the bullion’s appeal, as higher interest rates raise the opportunity cost of holding the non-interest-bearing metal.

The metal receded $17 per ounce to settle around $1,768 in the international market, according to All Sindh Saraf Jewellers Association (ASSJA).

Market participants are closely keeping an eye on the upcoming Federal Open Market Committee meeting to see how the central bank reacts to elevated inflation, which will result in likely larger price moves.

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