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Gold prices glimmer up 17% in 2003

KARACHI: Local gold prices rose over 17 percent in 2003 primarily due to a buoyant international market where gold prices soared by over 20 percent as more investors opted for safe heaven investing to seek refuge from the turbulent international capital and currency markets, traders and analysts said here Friday.

Gold prices in the domestic market increased by Rs 1,143 per 10 gram to Rs 7,778 in 2003 while international prices rose by $71 per ounce to $411 per ounce.

“The terrorist activities throughout the world, a weak US currency and the rising euro made gold expensive because investors changed their focus from capital markets to gold,” said Muhammad Sohail, head of research at Invest Capital and Securities, a local brokerage house. Traditionally, gold is considered as a safe heaven for investment and buying trends are often influenced by the international geopolitical situation as well as the state of the US currency.

The prices of this commodity in the local market closely follow international market trend.

Last year, the international security environment remained uncertain and the US currency also lost its strength which forced investors to shift to the gold market.

“The worsening situation in the Middle East was also a reason behind the increase in gold prices,” said Haji Farooq, an importer of gold. “Although gold consumption in Pakistan is quite low but prices follow international price trend,” he said. At the start of 2003, gold prices were at the level of Rs 6,635 per 10 gram but currently it is being trading at Rs 7,778 per 10 gram, showing an increase of 17.22 percent. Similarly, at present gold prices in the international market are hovering at $411 per ounce, against $340 per ounce at the start of the year.

Analysts say local prices did not increase as much as they did in the international market because of the stable dollar-rupee parity.

“If gold is listed at the proposed National Commodity Exchange then eventually its prices will come in line with the international market and gold buying would ultimately increase,” said Arshad Arif, head of research at KASB Securities, a local brokerage house.

Currently investment in gold in Pakistan is not in large quantity because it is difficult to physically carry gold in the country due to poor law and order situation, he said. Traders and analysts said international gold prices are likely to increase further in the next three to four months due to the weak dollar. “Gold prices are expected to trend higher in the first quarter of the year but the trend may halt afterwards as dollar is expected to gain strength in the second quarter,” said Mr Sohail.

Traders say another behind firm gold prices is the rising value of the euro against the dollar.

“It is the psyche of international investors that when the dollar value eases, investment shifts to the gold market,” said Haroon Chand, another gold importer. —Asif Khan

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