Gold prices face correction after witnessing major rally

The price of gold has surged again in the domestic market, with the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA) quoting that the price hike has catapulted the 24-karat tola gold rates to Rs 363,700. According to data from reports, the price of one tola of gold spiked by Rs 5,900, with 10-gram gold prices increasing by approximately Rs 5,000 to a new high of Rs 311,814.

However, the unofficial price of gold has reportedly reached Rs 390,000 per tola, as speculative buying remains strong. The difference in price could stem from traders charging a high premium to augment their incomes. Some believe this to be plausible, as gold traders and jewellers have witnessed a decline in sales volume over the past few months.

The reason behind the commodity’s surge in price lies in falling investor confidence in global capital and financial markets. Gold is perceived by many as a safe-haven asset, and with the US-China trade war sending global capital markets into a free fall, many have parked their funds in gold. 

However, Analysts believe that the market is due for a major correction, which could cause prices to fall in the near future. Moreover, with the Trump administration hinting at a possible trade deal with China, capital markets may regain much-needed stability. 

Previously, many believed that the price of gold had not hit its ceiling. Citing several factors, Goldman Sachs had previously revised its year-end 2025 gold price projection to $3,700 per troy ounce.

As of publication, the analyst’s claims seem to have come true, as international gold prices have recorded a sharp fall from $ 3,500 per troy ounce to just $ 3,325 per troy ounce. Data from exchanges indicates that the price of the yellow metal has already recorded a 1.52 percent decline.

A director at a reputable financial brokerage has suggested that the correction could be even larger. According to reports, the US dollar is facing pressure, which could partially explain the movement in gold prices.

The strength of the dollar and gold prices are inversely related, meaning that gold prices surge when the dollar depreciates. Reports indicate that the world's reserve currency has depreciated against multiple currencies owing to increased global uncertainty.

With a possible US-China deal in the works, many believe that investors will pull their funds out of the safe-haven asset, causing the gold price to drop substantially.