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Gold prices fall by Rs 1,400 to Rs 50,200/tola

21 June, 2013

KARACHI: The prices of yellow metal in the country fell by Rs 1,400 per tola to Rs 50,200 per tola on Thursday, bringing the total decline in 2013 to Rs 12,000 per tola.

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KARACHI: The prices of yellow metal in the country fell by Rs 1,400 per tola to Rs 50,200 per tola on Thursday, bringing the total decline in 2013 to Rs 12,000 per tola.

Due to fall in the prices of yellow metal on back of weak rupee against the dollar the leading investors were selling gold to buy greenback, said Saleem Ahmad, a metal expert in London.

The yellow metal price in the international market also witnessed a dip of $75 an ounce to stay at $1,259 an ounce and it dropped by 19.5 percent in 2013.

The investors were interested to buy dollar as its demand is rising in domestic and international markets besides reports of US market stability has also put some pressure on gold prices globally, he added.

Ahmad said gold being the safest haven for investment remained in focus despite the fact that its prices were on correction. Besides high returns on investment hedging became the driving force behind the low prices of gold in global markets.

The institutional and hedge fund buying improved on low prices of gold besides physical buying in Asian countries witnessed a slight improvement on back of its lowering rates.

The yellow metal is still in the eyes of leading buyers and hedge masters around the globe including leading major gold investors in Pakistan, he added.

Hedging in gold is still on the higher side as it touched around 19 percent in five months of 2013.

Gold like all precious metals may be used as a hedge against inflation, deflation or currency devaluation. The currencies of all the major countries, including ours are under severe pressure because of massive government deficits.

The price of gold is also affected by various well-documented mechanisms of artificial price suppression, arising from fractional reserve banking and naked short selling in gold and particularly involving the London Bullion Market Association, the United States Federal Reserve System and the banks HSBC and JPMorgan Chase.

The price of gold is driven by supply and demand as well as speculation, however unlike most other commodities, saving and disposal plays a larger role in affecting its price than its consumption.

According to the World Gold Council, annual mine production of gold over the last few years has been close to 2,510 tonnes.

About 2,100 tonnes goes into jewellery or industrial/dental production and around 500 tonnes goes to retail investors and exchange traded gold funds.

Central banks and the International Monetary Fund play an important role in the gold price.

It is generally accepted that interest rates are closely related to the price of gold. As a result, gold price can be closely correlated to central banks via the monetary policy decisions made by them related to interest rates.

Jewellery consistently accounts for over two-thirds of annual gold demand. India is the largest consumer in volume terms, accounting for around 27 percent of demand, followed by China and the USA.

Industrial, dental and medical uses account for around 12 percent of gold demand.


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