Gold prices in Pakistan declined sharply on Wednesday, tracking losses in the international market, where bullion came under pressure amid expectations that war-driven inflation could keep interest rates elevated, while investors monitored escalating geopolitical developments in the Middle East and upcoming US economic data.

According to the All-Pakistan Gems and Jewellers Sarafa Association, the price of gold per tola dropped by Rs8,600 to settle at Rs467,762 in the local market. Similarly, the price of 10-gram gold dipped by Rs7,373 to close at Rs401,030.

A day earlier, gold had surged to Rs476,362 per tola after gaining Rs4,600, reflecting continued volatility in both domestic and global bullion markets. Silver prices also moved lower on Wednesday, falling by Rs259 per tola to Rs7,894 in the local market.

In the international market, spot gold slipped nearly 1% to $4,440.99 per ounce by 1742 GMT, while US gold futures settled 1.2% lower at $4,466.90, according to Reuters.

Analysts attributed the decline to shifting expectations around monetary policy, with investors increasingly betting that persistent inflationary pressures, fueled in part by conflict-related disruptions, could delay rate cuts in major economies, particularly the US.

“Gold’s activity is largely driven by heightened tensions between the US and Iran,” said David Meger, Director of Metals Trading at High Ridge Futures. “As the conflict intensifies, rising energy prices are expected to lift inflation expectations. This could lead to higher interest rates, further strengthening the dollar and causing additional downward pressure on gold,” he added.

Bullion is often seen as a safeguard against inflation, but it tends to become less attractive as a non-yielding asset in a high interest-rate environment.

Oil prices rose, while the US dollar index was up for a third straight session. A stronger US currency makes dollar-priced metals more expensive for holders of other currencies.

Despite the escalation, markets showed a mixed reaction, with safe-haven demand for gold offset by stronger dollar expectations and fears that a prolonged conflict could keep global rates higher for longer.

Traders noted that the interplay between geopolitical risk and monetary tightening expectations was keeping bullion prices volatile, with sharp intra-day swings becoming more frequent.

Silver also mirrored gold’s downward trend, reflecting reduced industrial and safe-haven demand in the global market.

Meanwhile, the Pakistani rupee edged up against the US dollar in the inter-bank market, gaining Rs0.01 to close at 278.45, compared to Tuesday’s close at 278.46.