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Gold shines once again as demand is increased by record inflation.

On Thursday, gold prices increased as demand for the safe-haven metal increased in response to soaring inflation and waning risk appetite, albeit bullion’s gains were constrained by an appreciating Pakistani rupee.

According to information provided by the All Sindh Sarafa Association, the price of gold in Pakistan increased by Rs. 2,000 per tola and Rs. 1,715 per gramme to reach Rs. 141,000 and Rs. 120,885, respectively.

Gold’s four-day losing trend, during which its local market price fell by Rs8,100, was broken by a rise of more than 1.43% per tola.

Inflation based on the consumer price index in Pakistan jumped to a multi-decade high of 27.3% in August, driving up the price of gold to its highest level in one and a half years.

The safe-haven asset reversed its downward trend today as statistics showing multi-year high inflation increased its appeal; nevertheless, the strengthening of the Pakistani rupee was dragging the gold market’s heels and restricting its upside.

In the past, gold has been used to protect against inflation. Instead, lower central bank interest rate increases tend to raise government bond yields, which raises the opportunity cost of owning gold, which doesn’t pay interest.

Although interest rate increases would increase the opportunity cost of owning non-yielding bullion, gold is nevertheless seen as an inflation hedge.

The price of yellow metal fell by $13 per ounce to close at $1,702 on the world market. For the first time in six weeks, gold prices briefly fell below the crucial psychological level of $1,700 as major central banks maintained their tough posture in the fight against inflation, which lowered demand for non-yielding bullion.

It should be mentioned that the price of gold is below cost and is Rs 3,000 less per tola than Dubai.

In the meantime, domestic silver prices fell 50 rupees per tola and 42.87 rupees per gramme, respectively, to settle at 1,470 rupees per tola and 1,260.28 rupees per gramme today.