Gold faces second weekly drop in Pakistan on rate hike jitters

• Gold price settles at Rs194,100 per tola.
• It sheds Rs1,900 per tola during week ended Feb 25.
• Silver price falls by Rs20 per tola in domestic market.

Gold prices edged lower on Saturday and were set for a second straight weekly drop, as investors remained wary of impending interest rate hikes by the State Bank of Pakistan (SBP) to tame high inflation.

While gold is considered an inflation hedge but is highly sensitive to rising interest rates, which increase the opportunity cost of holding the non-yielding bullion.

Data released by the All-Pakistan Sarafa Gems and Jewellers Association (APSGJA) showed that the price of gold (24 carats) declined by Rs1,000 per tola and Rs858 per 10 grams to settle at Rs194,100 and Rs166,409, respectively.

Investors expect the central bank to raise interest rates as early as this week in an off-cycle review as the South Asian nation faces pressure to mend its finances amid a $1 billion loan tranche it is seeking from the International Monetary Fund (IMF).

Cumulatively, the precious commodity lost Rs1,900 per tola during the week ending February 25.

Meanwhile, silver prices in the domestic market fell by Rs20 per tola and Rs17.15 per 10 grams to settle at Rs2,080 per tola and Rs1,783.26 per 10 grams, respectively.

In the international market, the gold price slipped by $8 per ounce to settle at $1,810 — its lowest in eight weeks — pushed down by a stronger dollar and bond yields as the market braced for more interest rate hikes by the US Federal Reserve in the coming months.

Pressuring gold, the dollar index rose to a seven-week peak, while benchmark yields were also en route to their fifth weekly rise.