Gold falls on hawkish Fed signals

Gold prices in Pakistan fell on Wednesday, tracking a decline in the international market, as hawkish signals from the US Federal Reserve officials strengthened expectations of further rate increases and pushed the US dollar to a two-month high. In the local market, the gold price per tola fell Rs1,800 to Rs453,936, according to rates released by the All-Pakistan Gems and Jewellers Sarafa Association. The price of 10-gram gold decreased Rs1,544 to Rs389,176. Internationally, spot gold fell 1.1% to $4,304.89 per ounce as of 1305 GMT, while US gold futures for December delivery declined 0.8% to $4,341.90, as per Reuters. The stronger dollar made gold, priced in the greenback, more expensive for holders of other currencies. The pressure on bullion intensified after Federal Reserve officials maintained a hawkish tone following last week's 25-basis-point rate increase, which took the US benchmark rate to 3.75%-4%. Richmond Fed President Tom Barkin said inflation was no longer limited to energy and tariff-related shocks, pointing to broader economic strength and consumer demand as sources of price pressure. He backed the recent rate increase and said further tightening could help contain inflation expectations. Boston Fed President Susan Collins also supported the recent rate hike, citing persistent inflation risks and saying a somewhat more restrictive policy stance could be needed to bring inflation sustainably back to the Fed's 2% target. Markets have consequently increased their focus on the possibility of another rate increase this year. Higher interest rates tend to weigh on non-yielding assets such as gold by increasing the relative appeal of interest-bearing investments. Geopolitical developments provided a countervailing factor. US President Donald Trump warned that he could "annihilate" Iran if efforts to reach a deal failed, while diplomatic contacts between Washington and Tehran continued. The uncertainty surrounding the Middle East conflict has maintained some safe-haven demand for bullion. Other precious metals also declined. International spot silver fell 2.7% to $65.28 per ounce, while platinum dropped 2.3% to $1,790.48 and palladium declined 2% to $1,280.72. In Pakistan, silver prices decreased Rs30 to Rs7,008 per tola on Wednesday. Meanwhile, the Pakistani rupee closed at 277.20 against the US dollar, gaining Rs0.01 from Tuesday's close at 277.21. Globally, the dollar held near a two-month high amid expectations of near-term rate hikes and uncertainty about Middle East developments.