- Price increase in response to possible US Fed rate cut
- Gold price increase moderated by strengthening LKR
- Arbitrage with Dubai no longer available
- Prices to increase due to Christmas demand
Local gold prices rebounded last week following a sustained period of decline over the preceding weeks amidst falling world market prices, according to sources from the local gold market.
Speaking to The Sunday Morning Business, Mohammed Nahnan of Ran Lanka Gem and Jewellery stated that local gold prices had experienced an upward trend last week in reaction to increasing world gold prices, albeit at a comparably lower rate of increase due to the strengthening of the Sri Lankan Rupee.
Accordingly, he revealed that as of Wednesday (11), the local market price for 24 carat 8 g (1 sovereign) had rebounded to around Rs. 210,000. Similarly, the price for 22 carat 8 g (1 sovereign) had reached Rs. 192,500.
However, he pointed out that these prices were substantially lower than all-time-high prices of Rs. 220,000 for 24 carat 8 g (1 sovereign) and Rs. 201,000 for 22 carat 8 g (1 sovereign) recorded at the end of October.
Elaborating further on the reasons for the recent local gold market prices, he stated: “The Reuters price (world gold price) reached an all-time high and then fell for a while. Yesterday (10) the Reuters price was $ 2,670 while today (11) it is $ 2,696. It has now started to increase again.”
Nahnan further revealed that due to the sharp drop in the exchange rate over the past few months, the arbitrage opportunity that had existed when purchasing gold from Dubai and selling in Sri Lanka had disappeared.
He pointed out that prior to the strengthening of the Sri Lankan Rupee, gold prices in Sri Lanka had been around Rs. 10,000 higher than prices in Dubai. However, following the drop in the exchange rate, local gold prices are now around Rs. 3,000 lower than prices in Dubai.
Similar sentiments were expressed to The Sunday Morning Business by H.M. Ramzi from We Buy Gold, who stated that while gold prices in the local market had constricted sharply during November in response to the downtrend in the world market and the strengthening Sri Lankan Rupee, it had since started trending upwards, mirroring the recent uptrend in the world market.
According to him, as of Thursday (12), the local market price for 24 carat 8 g (1 sovereign) stood at Rs. 210,000 and the price for 22 carat 8 g (1 sovereign) stood at Rs. 192,000.
However, he noted that in addition to the impact of world market prices, local bullion prices would be pushed upwards in the near term due to increased demand during the festive season.
“Prices have been increasing gradually since the beginning of the month. Since Christmas is in December, prices have traditionally moved upwards due to increased demand,” Ramzi noted.
Spot gold prices in the world market reached an all-time high of $ 2,790.15 on 31 October before falling sharply during November.
According to Reuters, November was the worst month for gold since September 2023, which saw prices drop by over 3% as ‘Trump euphoria’ saw the US Dollar strengthen, triggering a post-election sell-off.
However, world gold prices have started trending upward over the past week due to the increasing likelihood of a third US interest rate cut by the Federal Reserve.