Geopolitical friction drives gold down by Rs4,900

Gold prices in Pakistan retreated significantly on Monday, tracking a sharp downturn in the international market, as global investors navigated a volatile mix of geopolitical tensions and strengthening economic indicators. According to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA), the price of 24-karat gold per tola dropped by Rs4,900 to settle at Rs501,162. This correction effectively wiped out the gains seen during the previous session on Saturday, when prices had climbed by Rs4,500. Similarly, the 10-gram gold rate fell by Rs4,201 to reach Rs429,665, while silver shed Rs145 to close at Rs8,417 per tola. The domestic slump was a direct reflection of the global stage, where spot gold dipped 0.5% to $4,802.75 per ounce after hitting a one-week low of $4,736 earlier in the day. The primary catalyst for this fluctuation was the surge in the US dollar and rising benchmark 10-year Treasury yields. As the dollar hit a one-week high, gold became more expensive for international buyers, while higher yields increased the opportunity cost of holding non-yielding bullion. These shifts were exacerbated by renewed US-Iran tensions following the US takeover of an Iranian cargo vessel, an event that sent oil prices climbing by 5% and injected fresh uncertainty into markets. Market experts noted that while gold initially dipped due to the news of renewed friction, it managed a slight recovery to hold near the $4,800 mark. Adnan Agar, Director of Interactive Commodities, highlighted market scepticism regarding a swift diplomatic resolution. He pointed out that deep-seated mistrust and complex history of negotiations make a breakthrough unlikely in the next 10 to 20 days. Even regional relationships are strained, suggesting that Iran's apparent lack of full trust in intermediaries like Pakistan complicates the potential for a quick peace deal. Looking ahead, Agar said the bullion market remains in a state of cautious observation. While a stronger dollar and rising yields act as headwinds, underlying geopolitical instability continues to provide a supportive backdrop for gold's safe-haven appeal. He expected more clarity to emerge within the next 48 hours as the impact of the US delegation's efforts becomes visible. Meanwhile, the Pakistani rupee posted a marginal gain of Rs0.01 against the US dollar in the inter-bank market on Monday, closing at Rs278.91 compared with Friday's close at Rs278.92, according to the SBP.