Gold prices in Pakistan decreased on Tuesday, with a gram costing 39,486.39 Pakistani Rupees (PKR), down from 39,631.63 PKR on Monday. Similarly, the price per tola dropped to PKR 460,559.40, from the previous 462,255.60.

The US Dollar’s continued strength put downward pressure on Gold prices. Despite easing US-China trade tensions, the potential economic risks and geopolitical issues keep Gold as a sought-after asset.

Potential Trade Deal

US President Donald Trump stated that a full tariff on China would not be sustainable and hinted at a possible deal between the two nations. Furthermore, traders expect a 25-basis-point rate cut by the US Federal Reserve. This may limit major USD appreciation, supporting Gold amid global economic uncertainties.

The US government shutdown affects economic performance, with the Senate failing to pass reopening measures. Geopolitical tensions persist as Russian President Putin demands Ukraine hand over Donetsk.

Gold prices are influenced by geopolitical instability, recession fears, and interest rate changes. Central banks hold significant Gold reserves to strengthen their economies. Globally, investors view Gold as a hedge against inflation and depreciating currencies. Factors like the US Dollar’s strength and interest rates deeply impact Gold’s pricing.

Gold prices are seeing some pressure this week, reflecting a minor dip similar to what we are seeing in local Pakistani markets. A resilient US Dollar, with the DXY index currently holding firm above the 105 level, is putting a cap on any significant upward moves. This presents a challenging environment where the metal’s traditional drivers are in conflict.

We remember that back in late 2019, markets had almost fully priced in multiple Federal Reserve rate cuts, which provided a strong tailwind for gold. Today, however, the situation is far more uncertain, as the CME FedWatch Tool indicates traders are pricing in only a 40% chance of a rate cut before the end of the year. This indecision from the Fed is keeping the non-yielding metal in a tight trading range.

Geopolitical Risks and Market Impact

Geopolitical risks, such as those we monitored in Eastern Europe, remain a background factor, but their ability to shock the market has diminished. We are now paying closer attention to trade negotiations and supply chain reports coming out of Asia, as these are having a more direct impact on global growth sentiment. Any sign of slowing economic performance could quickly renew interest in gold as a safe-haven asset.

The underlying support for gold from central banks cannot be overstated, a trend that has only strengthened since the record-breaking net purchases of 1,078 tonnes we saw in 2022. Recent data from the World Gold Council confirms that central banks, particularly in emerging markets, continued to be aggressive buyers through 2024 and into 2025. This consistent demand provides a solid floor for prices, making a major collapse unlikely.

For derivative traders, this suggests that selling call options at key resistance levels near the $2,200 per ounce mark could be a viable strategy to generate income from the expected range-bound activity. At the same time, buying long-dated put options can serve as a cost-effective hedge against a sharp downturn if the Fed signals a more aggressive stance. Watching the inverse relationship with rising US Treasury yields, which recently touched multi-year highs, remains critical.

All of our eyes will be on the release of the latest US consumer inflation figures this Friday. A higher-than-expected number would likely reinforce the dollar’s strength and pressure gold prices further. Conversely, a soft inflation print could reignite bets for a Fed policy pivot, providing the catalyst needed for gold to break out of its current consolidation.

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