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Gold prices in Pakistan moved up and Gold Prices in USA moved down after strong US economic data

 

Gold prices in USA saw a fall during the last week.Gold prices in USA started the week at $ 1258.80/ounce and ended the week at $ 1253.10 /ounce.This is 0.45 % decrease in the  gold prices in USA.Gold prices in Pakistan started the week at Rs 50500/tola and ended the week at Rs 50900 /tola. This is 0.79 % increase in the  gold prices in Pakistan. Following factors played an important role in affecting the gold prices.

US dollar

Dutch bank ABN Amro analyst Georgette Boele believes that good days of the gold are over now.The strength of the US economy is  helping the US dollar to improve its value in the market.US dollar index which measures the value of the US dollar has gained 1.48 points in last week.US dollar index started the week at 96.52 points and ended the week at 98 points.

US dollar plays an important role in affecting the gold prices in USA and gold prices in Pakistan. Analysts believe that rising interest rates will also help US dollar to improve its value in the international market.Rising interest rates are not a good news  for non-yielding assets like gold.Rise in the interest rates makes income paying assets more attractive to the investors. It also tends to help the dollar, against which gold is held as a hedge.

US economic Data and Gold prices in USA

Currently ,US economy is showing real signs of recovery and growth.US retail sales in September 2016 have  showed an improvement as compared to the  retail sales of August 2016.US retail sales grew by 0.6 % during the month of September 2016.In the month of August 2016,US retail sales declined by 0.2 %.producer prices this year have also showed an improvement as compared to the last year.

Analysts believe that gradual improvement in the US economy is increasing the chances of rate hike in next two months.Now it is expected that Fed will increase rates in next two months.The gold prices in USA opened at $ 1253.90/ounce on Friday and touched the lowest level of   $ 1250.60/ounce during the same day .The gold prices decreased by 0.26 % after the release of the US economic data on Friday.

Future Outlook

Market analysts like Julius Baer believe that party time of safe haven assets like gold is now over.The demand of the safe haven assets is decreasing with strengthening of the US economy. The strengthening  of US dollar is also putting pressure on the gold prices in USA and gold prices in Pakistan. Now the future of gold market is in the hands of Donald trump and Federal reserve. Donald trump’s victory in the US presidential elections  will bring an uncertainty to the US economy.This uncertainty will give a outside chance to safe haven assets like gold to make a swift recovery.

 

Gold is currently trading below the 200-day moving average. Technical analysts believe that this means that gold is oversold now.So the short term prospects of the gold market are very bleak.So short term investors should offload their gold investments to minimize their losses.The long term prospects of gold market are also not so encouraging.As Federal reserve is planning to raise interest rates in December 2016 and US economy is showing a very good recovery .These two factors will badly affect the gold prices in Pakistan and Gold prices in USA.

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About Emaad Qureshi