Gold falls; liquidity model eyes $5,025

Gold rates in Pakistan fell on Tuesday, tracking weaker international prices, according to The Express Tribune. The All-Pakistan Gems and Jewellers Sarafa Association quoted 24-karat gold at Rs465,336 per tola after a Rs800 drop during the day, while 10-gram gold changed hands at Rs398,950. Silver weakened too, down Rs50 at Rs7,129 per tola.

The local decline mirrored losses abroad, where spot gold slid 2.9% to $4,567.23 an ounce, its weakest since August 20, according to Reuters. Traders bet more heavily on a US rate increase after Federal Reserve Chairman Kevin Warsh spoke of the need to contain inflation on Friday. Across Monday and Tuesday, the local per-tola rate has fallen Rs2,600, with Monday accounting for Rs1,800 of that drop.

The Kobeissi Letter passed along a Fidelity study that puts gold at $5,025 an ounce, based on the metal's past link to global M2 money supply. Global M2 rose 8.5% year on year in August, against around 7% in June, and Adnan Agar of Interactive Commodities said faster money growth has tended to support the metal. The latest fall has widened the gap between prices and that model value. Agar also described the approach as model-driven rather than predictive.