Gold prices in Pakistan stayed steady on Thursday. The price per gram was 30,411.23 Pakistani Rupees, while a tola was 354,710.70 Pakistani Rupees. US President Donald Trump criticized Federal Reserve Chair Jerome Powell for not lowering interest rates. Powell stated that the central bank would hold off until there is a clearer view of inflation caused by tariffs.

Impact of US Rate Cuts

Speculation about a 50 basis point rate cut has pushed the US Dollar to its lowest level in three years, making gold a more attractive investment. However, this optimism doesn’t completely ease concerns in the market, especially regarding the fragile situation between Israel and Iran. Investors are focusing on the US economic agenda, which includes the final GDP report for the first quarter and various sales data. Traders are also waiting for remarks from Federal Open Market Committee (FOMC) members and important inflation data coming out on Friday. Central banks play a significant role in the gold market, having added 1,136 tonnes worth around $70 billion to their reserves in 2022. Issues like geopolitical uncertainty or economic downturns can make gold more appealing as a safe investment.

Central Banks and Gold Reserves

Gold prices generally rise when the US Dollar weakens. A strong Dollar usually depresses gold prices, as it does not provide yields. With gold prices steady in Pakistan, and the per-gram rate holding at 30,411 PKR, it’s essential to note that this stability doesn’t mean the market is calm overall. The situation in the US is very sensitive right now, especially after Trump publicly criticized Powell for not cutting rates more aggressively. Powell remains committed to a cautious approach, stating that they won’t make changes until tariff-related inflation readings are clearer. This ongoing debate over whether to cut rates is not just theoretical; it has real implications. The weakening of the Dollar, now at a three-year low, tends to support gold prices. Traders have reacted by betting on a significant 50 basis-point reduction, which has led to an increase in demand for safer physical assets. However, market participants are still cautious, as not everything is settled. Tensions in the Middle East, particularly the fragile ceasefire between Israel and Iran, create uncertainty that tempers enthusiasm for gold, even when economic conditions suggest otherwise. If the ceasefire collapses, there could be a surge in demand for gold. We are closely monitoring US economic data, which includes significant reports: the final GDP numbers for the first quarter, core retail sales, and industrial production figures. Additionally, speeches from FOMC members, especially those who have favored higher rates, could influence current expectations for rate cuts. Most urgently, Friday’s inflation data will impact market forecasts for asset prices. Discussions around gold would not be complete without mentioning central bank activities. Last year, central banks increased their gold holdings by over a thousand tonnes, indicating a trend towards retaining physical reserves amid financial instability. Looking at the big picture, it’s clear: in a world of lower yields and political turmoil, gold—a non-yielding asset—gains value. The typical inverse relationship between the price of gold and the strength of the Dollar remains strong—when the Dollar falls, gold prices rise. With this understanding, we should prepare for increased market volatility. Price movements may not always be straightforward and can react sharply to news, especially with significant economic reports approaching. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now