Sunday, May 22, 2022

Gold and Dollars are also not preferred asset class


Muzammil Aslam
Muzzammil Aslam has over 15 years of experience in the fields of Economics, Equity Research, Business Development and Financial / Capital markets. Worked as Ex- Chief Executive Officer, EFG Hermes Pakistan Limited. Heading brokerage and inter-bank business and company affairs. He was engaged with KASB Securities Ltd. as Head of Business Development from 2004 to 2009 and with JS Global Capital Ltd. as Head of Business Development and Head of Research from 2009 to 2012. Thereafter, he has been managing his own economic research consultancy firm "Emerging Economics Research". Further, his work on economics has been actively pursued by key government institutions. By qualification, Mr. Aslam holds Bachelor of Commerce and Master of Public Administration Degrees from the University of Karachi, MAS Degree in Economics from Applied Economics Research Centre, University of Karachi and Master of Science Degree in Economics from the University of Bath, United Kingdom. Contact: [email protected]

While everyone pondering about interest rates & exchange outlook. We have seemed to miss the bashing at gold market.

Lack of liquidity had triggered sell off at local gold market. Currently gold is available around 5% under-cost. Just today gold prices came down by Rs1000 to Rs 66,600/Tola, despite $2 increase in gold prices.

On the other hand, cash dollar prices further slashed to 141.5/142.5. Recall during April dollar touched 148/$ at one point

What can we infer from above?

1) Strict vigilance at airports & border has ceased the smuggling of gold & dollars

2) Higher interest rates are forcing de-dollarisation

3) Risk of crack down on cash gold sales has forced reduced demand for gold

If the above trend will sustain then one should expect the diversion of liquidity towards equities.

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