Gold prices in Pakistan fell on Tuesday. A gram is now priced at 39,486.39 Pakistani Rupees (PKR), down from 39,631.63 PKR on Monday. The price per tola also decreased to PKR 460,559.40, down from 462,255.60. The strength of the US Dollar has put pressure on Gold prices. While US-China trade tensions have lessened, ongoing economic risks and geopolitical issues keep Gold in demand.

Potential Trade Deal

US President Donald Trump mentioned that maintaining full tariffs on China isn’t feasible, suggesting a potential deal could be on the horizon. Traders also expect the US Federal Reserve to cut rates by 25 basis points. This could limit the rise of the US Dollar, which may support Gold amid global economic uncertainties. The US government shutdown is affecting the economy, with the Senate unable to pass reopening measures. Additionally, geopolitical tensions are high as Russian President Putin has demanded Ukraine surrender Donetsk. Gold prices are affected by instability, fears of recession, and interest rate changes. Central banks hold large Gold reserves to bolster their economies. Investors worldwide often turn to Gold as protection against inflation and falling currencies. The strength of the US Dollar and interest rates greatly influence Gold’s value. This week, Gold prices are under some pressure, experiencing a slight decline similar to trends in local Pakistani markets. A strong US Dollar, indicated by the DXY index being above 105, is limiting significant price increases. This creates a challenging landscape where traditional factors impacting the metal are conflicted. In late 2019, expectations for multiple Federal Reserve rate cuts gave Gold a boost. Currently, the situation is uncertain. The CME FedWatch Tool shows only a 40% chance of a rate cut by year-end. This indecision keeps Gold trading within a narrow range.

Geopolitical Risks and Market Impact

Geopolitical risks in Eastern Europe remain a factor, but their impact on the market has decreased. Now, trade negotiations and supply chain reports from Asia are more relevant to global growth. Any signs of slowing economic performance could revive interest in Gold as a safe haven. The support for Gold from central banks is significant and has strengthened since the record purchase of 1,078 tonnes in 2022. Recent data from the World Gold Council shows that central banks, especially in emerging markets, continue to buy aggressively through 2024 and into 2025. This steady demand helps stabilize prices, making a sharp drop unlikely. For traders dealing in derivatives, selling call options at key resistance levels near the $2,200 per ounce mark could be a smart strategy to earn income from range-bound activity. Meanwhile, buying long-dated put options can provide an affordable hedge against a sharp decline if the Fed takes a more aggressive approach. It’s essential to monitor rising US Treasury yields, which have recently hit multi-year highs. All eyes will be on the release of the latest US consumer inflation figures this Friday. Higher-than-expected inflation could boost the dollar’s strength and further pressure Gold prices. Conversely, a lower inflation number might revive speculation about a change in Fed policy, potentially leading to a breakout for Gold from its current consolidation. Create your live VT Markets account and start trading now.

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