The international gold prices followed a seesaw path last week.Gold market is passing through a very unstable period since January this year.The gold prices in USA started the week at $ 1321/ounce and ended the week at $ 1305/ounce.The expectations of interest rate increase and little high US inflation for the month of August affected the gold prices in USA.The gold prices in Pakistan also followed the path of international gold market.The gold prices in Pakistan started the week at Rs 51400/tola and ended the week at $ 51100/tola. The gold market in Pakistan was closed for three days due to the Eid holidays.It was closed from 12th September 2016 to 14th September 2016.There are lots of factors affecting the international gold prices. Following are the most important factors who affected the gold prices in last week.
US inflation data and Gold prices in USA
According to the reports released by the U.S. Department of Labor, there was a 1.1 % increase in the consumer price index (CPI) of the August 2016 as compared to the August 2015 .The inflation rate for the month of August 2016 was 0.2 % .This data increased the chances of interest rate hike by Fed reserve in next few weeks.This news put pressure on the Gold prices in USA and Gold prices in Pakistan. The gold prices decreased from $ 1313 /ounce to $ 1305/ounce after the announcement of the US inflation data on Friday.
Economic Reports and Gold prices
US Economic reports played an important role in affecting the gold prices in USA and Gold prices in Pakistan. A economic report was released on Thursday about the different economic indicators of US economy.The retail report showed that august retail sales decreased by 0.3 % as compared to the last month. The negative trend in retail sales was mainly attributed to the smaller than expected auto sales in the US market.The overall retail sales showed an encouraging growth of 1.9 % during the year 2016.The GDP forecast for the third quarter of 2016 also declined after this report about the retail sales.Now the projected GDP growth rate is 3.0 % as compared to the previous forecast of 3,3 %.These reports helped gold prices in USA to increase from $ 1313/ounce to $ 1320/ounce for a brief time on Thursday.Experts believe that positive news about Philadelphia Fed’s Manufacturing Index kept the gold prices in check.Philadelphia Fed’s Manufacturing Index reached 12.8 % at the end of the week.Experts believe that this is a very encouraging sign for the overall economy.
Gold investors must keep an eye on the announcements related to the Federal reserve interest rate hike.According to the CME Group’s Fedwatch tool, the probability of the rate hike from 0.50 to 0.75 is at 15 % for the month of September 2016,.This probability is at 22 % for the month of November 2016 and this probability is at 52 % for the December 2016.
Seeing these probabilities ,it is suggested that short term gold investors must offload their investments as soon as possible.It is important because the expectations about the federal reserve rate hike are increasing with every passing week.This rate hike will certainly put pressure on the Gold prices in USA and Gold prices in Pakistan. This hike can push gold prices between 1100/ounce to 1200/ounce.