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Weekly Review : Gold prices in USA and Gold prices in Pakistan continue to fall

Gold prices in USA started the week at $ 1181/ounce and ended the week at $ 1159/ounce.Gold prices in Pakistan are also following the pattern set by the international factors.Gold prices in Pakistan started the week at Rs 49300/tola  and ended the week at Rs 49700/tola. Following are the most important factors affecting the gold prices in USA and gold prices in Pakistan

Strong US economy and Gold prices in USA

The demand of gold is badly affected by the strong US economy.Now it is almost certain that Federal reserve will increase the interest rates in its December 2016 meeting.The investors expectations of rate hike have increased to  94.9% . Investors are also expecting another rate hike in the second quarter of 2017.

According to the figures released by the Commerzbank ,investors have started selling their gold based exchanged traded funds.They have withdrawn money from gold based funds equal to 10 tons worth of gold.

Italian economic Uncertainty

Gold lost its value after Italian Prime Minister  announced to accept his defeat in the referendum to reform the country’s constitution.Gold prices in USA lost by 1 % after the announcement of the Italian premier.This political uncertainty failed to help gold prices recover mainly due to fall in the value of euro .

Federal Reserve

Gold prices in USA touched their lowest level in last ten months.Federal reserve is going to increase the interest rates in this week.The safe haven demand is really affected by the rate hike expectations.it is expected that fed will increase interest rates by 0.25 %. The spot gold has currently reached $1,153.93/ ounce level.

Indian Demonetization and Gold prices in USA

Indian demonetization policies are really affecting the Indian gold market.This policy has brought drastic results for the gold market.Indian government has also put a ban on frequent withdrawal of large sum of amount from the banks. People can only withdraw large sums of money for their marriage expenses. It has also affected the international gold demand as India is the 2nd largest consumer of the gold.Gold demand failed to pick even in the festive season.Gold sellers are still worried about the unsold November gold stock.

Future Outlook

Market analysts are  expecting a bleak week ahead for the  international gold market.Gold investors are concerned about the future about the future of the gold market. The expected federal reserve rate hike,Indian demonetization polices and strong US economy is putting lots of pressure on the gold prices in USA.

Investors were expecting an improved demand after the start of festive season in India, but it never happened.Indian demand got a serious setback after the introduction of demonetization polices of Modi government. Indian demand fell by 50 % in the month of December. This trend will further pressurize the gold prices in USA.

Federal Reserve is expected to increase the interest rates by 0.25 % in its next meeting. Gold prices can fall below the $ 1000/ounce level after the interest rate hike.

After analyzing the above mentioned market factors,it is strongly advised to sell the gold . It is expected that gold prices in USA will hover between $ 1000/ounce to $ 1100/ounce level in next few weeks.

About Emaad Qureshi