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Monthly Review : Gold Prices in Pakistan (May 2016)

Gold prices in Pakistan have showed a considerable slide in last one month.They started the month of May 2016 at Rs 52341 per tola and ended the month at Rs 48100 per tola. This is 8.81 % decrease in the gold prices in Pakistan as compared to the month of April 2016.Thegold prices in USA and international market also showed a slide in last one month.The gold prices in USA started the month at $ 1294 per ounce and ended the month at $ 1214 per ounce.This is 6.59 % decrease in the prices as compared to the prices in the month of April 2016.Following are the three most important reasons for slide in the gold prices.

Appreciation of the dollar

Gold prices in Pakistan are directly influenced by the Gold prices in USA.American gold prices are directly influenced by the value of the dollar.US dollar index which measures the value of dollar started the month at 92.62 points and ended the month with 95.83 points.This means that the value of dollar has increased by 3.46 % during the month of May 2016.

Federal reserve interest rate

Market analysts are expecting a possible interest rate hike by the federal reserve of America.These experts have raised their expectations of rate increase from 28 % to 58 % within a month.Miss Yelen on Friday announced that increase in interest rates is on the cards in upcoming months.She also told media that continued improvement in the economy is must for future increase in the interest rates.

Portfolio managers at Aberdeen asset management firmly believe that are Gold prices in USA will decrease with the increase in the interest rates .This will happen as it will make gold less attractive investment option for the investors as compared to the stocks and other investment options available in the financial market.

Improvement in the US Economy

US economy is showing visible signs of improvement for the last few weeks. The ADP National Employment Report showed that private salaries improved 173,000 previous month on top of the 166,000 jobs added in April 2016. The construction industry has really showed great improvement in last month as it added 13000 jobs.The services industry of the USA also added 175000 jobs in the month of May 2016.

Future Outlook

Market analysts are expecting a bearish trend in the gold market for the next month. The expected hike in the interest rates and improvement in US economy are two reasons for the expected slid in the gold prices in USA and Gold prices in Pakistan.

Advise to the Gold investors in Pakistan

Gold investors have to be extremely careful while investing in the gold market. They have to keep an eye on the fluctuations in the gold prices in USA and gold prices in Pakistan in last few months. They can make use of the market data available at portals such as (www.Investing.com) and (www.marketwatch.com).The gold prices fluctuations should be compared with the market news to make accurate investment decision. Short term investors should adopt day trading strategy as gold market will remain volatile in the month of June 2016.Long term investors should avoid investing in the gold as Gold prices in USA andGold prices in Pakistan are expected to follow a downward trend in the current year.

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About Emaad Qureshi