• Local gold prices dip 3.5% in 2 weeks following global market trends
• Global instability initially drove prices up; recent declines due to profit-taking, stronger dollar
• Anticipated US interest rate cuts and economic data shift investor focus

Local gold prices have been trending downwards over the past two weeks due to the sharp decrease in world market prices, while the exchange rate of the Sri Lankan Rupee against the US Dollar has remained stagnant, market sources reveal. 

Speaking to The Sunday Morning Business, Cash for Gold Ltd. Owner Ramzan Haneef revealed that over the past two weeks, the price for 24 carat 8 grammes (one sovereign) had fallen by around 3.5% to around Rs. 192,000, after having reached a high of Rs. 199,000 earlier this month.

He further revealed that the local price for 22 carat 8 grammes (one sovereign) had also fallen to around Rs. 174,000.   

Elaborating further, Haneef stated that the constriction of the price of bullion in the local market was mainly due to the fall in world market prices. 

“The price of gold is on a downward trend because world market prices are down. Even yesterday (24) the gold prices fell by 20 US cents,” he stated.

Haneef further pointed out that leading up to this month, one of the factors pushing local bullion prices up had been the depreciation of the Sri Lankan Rupee. However, he claimed that over the past two weeks, the exchange rate had more or less stagnated at its current level.  

Commenting further, he pointed out that prior to the recent correction, gold prices had been on a sharp upward trend since the beginning of the year due to global political instability. 

Gold, which is considered a hedge against inflation and a haven during periods of political and economic uncertainty, has seen its price in the world market surge by over 15% since the turn of the year.

As a result, spot gold hit an all-time high of $ 2,483.60 per ounce earlier this month before rebounding downwards over the past two weeks amidst profit-taking and strengthening of the US Dollar fuelled by rising expectations of US interest rate cuts in September.

Speaking to Reuters, Allegiance Gold Chief Operating Officer (COO) Alex Ebkarian stated: “Besides profit-taking, the market is down on this narrative of a soft landing; it could put pressure on the price of gold, as investors will shift money from a safe to more riskier investment.”

According to the CME FedWatch Tool as reported by Reuters, markets “are now anticipating a 98% chance of a rate cut by the US Federal Reserve in September”.

However, by the end of the preceding week, spot gold prices started to appreciate as the dollar slipped, with US investors’ focus shifting to US economic data due by the end of the week, for more signals on the timing of the central bank’s interest rate cuts.