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Local gold prices hit all-time high 

28 Mar 2022

  • A pawn between Rs. 176,000 and 183,000 
BY SHENAL FERNANDO  Local gold prices have surged to all-time high in the face of the rapid depreciation of the Sri Lanka rupee against the US dollar over the past three weeks and due to high global prices in the face of the uncertainty created by the Russia-Ukraine war. Speaking to The Morning Business yesterday (27), several sources within the local gold and jewellery industry divulged that as of yesterday, the market rate for 24 carat 8 grammes (g) (one pawn) was around Rs. 176,000-183,000, while the market rate for 22 carat 8 g (one pawn) was around Rs. 163,000. Explaining further, a source stated: “The primary reason for the significant rise in gold prices (domestic market) is the increasing price of US dollars. But before this, gold prices in the world market were also very high.”  Since the decision by the Central Bank of Sri Lanka (CBSL) to float the exchange rate on 7 March 2022, the Sri Lankan rupee has depreciated significantly by over 45% and according to the average buying and selling Telegraphic Transfers (TT) exchange rates published by the CBSL on 25 March, the selling rate of a US dollar stood at Rs. 295.0 while the buying rate of US dollar stood at Rs. 290.0. Furthermore, certain licensed banks (LBs) such as People’s Bank and Sampath Bank were quoting a TT selling rate per US dollar at Rs. 299.0 on 25 March. Therefore, the gold price for one troy ounce (one troy ounce = 31.1034768 grammes) published daily by the CBSL based on the gold price for one troy ounce in US dollars at the beginning of the business day on Reuters or Bloomberg and the Indicative US Dollar SPOT Exchange Rate, has increased by 41.6% since the decision by the CBSL to float the exchange rate on 7 March 2022. Accordingly as of 25 March, the gold price for one troy ounce was Rs. 569,578.85, up from Rs. 402,149.50 on 7 March, as per data published by the CBSL.  However, as stated by sources within the local gold and jewellery industry, global gold prices were already at extremely high levels prior to the floating of the exchange rate. Global gold prices for one troy ounce reached $ 2,069 on 8 March as people turn to precious metals as safe havens amidst rising global inflation, high energy prices due to the ban on Russian petroleum products, and war fears. Therefore, the global gold prices were at extremely high levels as of early March 2022, close to surpassing the all-time high of $ 2,072 recorded in early August 2020.  However, since then, global gold prices for one troy ounce have fallen below $ 2,000 amidst hope of a diplomatic solution for the Russia-Ukraine war and with the US Treasury yields hitting fresh multi-year highs due to the decision by the US Federal Reserve to increase the interest rate by 0.25% and the announcement of its projection of six more interest rate hikes within 2022. Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion. Therefore, global gold prices for one troy ounce stand at around $ 1,958 as of 25 March 2022.


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