LAHORE-  The price of gold has dropped to Rs46,500 per tola in the country, following a $27 per ounce reduction in the international gold market. The price in the local market decreased by Rs 1,000 per tola (11.25 grams).

Market sources said that the precious metal dropped to a three-year low in the international market to near $1,200 an ounce, putting it on course for its worst quarterly performance in over half a century. The price of 10 gram gold went down by Rs857, making it Rs39,900 per tola.

Predicting a further decrease in gold prices, Lahore Sarafa Bazar Association president Hafiz Ahmed said that rates of gold are expected to go down to Rs42,000 per tola.

He said that the value of the dollar is increasing, therefore, people have started selling their gold to buy currency. Earlier they were selling off currency to buy gold. Market experts said that America’s economy is improving as it has improved its relationship with North Korea, Iran and other nations, giving a boost to its economy.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged at near four-year lows for a second consecutive day on Thursday. The fund has recorded unprecedented outflows of 12.26 million ounces so far this year, down 28 percent to 31.7 million ounces.

Concerns over a credit crunch and economic growth in China also weighed on investors.

They said that in global market gold fell below $1,200 an ounce to its lowest since August 2010 on Friday, on track to post its worst quarter on record, as fears persisted that the US Federal Reserve will wind down its monetary stimulus soon.

Bullion has taken a beating, losing as much as 15 percent or about $200 an ounce, since the beginning of last week when Fed Chairman Ben Bernanke laid out a strategy to roll back the bank’s $85 billion monthly bond purchases in a recovering economy. This supports an increase in real interest rates, making gold comparatively less attractive.

They said that gold has been battered by the Fed’s policy stance, while the change in U.S. real interest rates, which have turned positive in June, has become an element disproportionately negative for gold relative to other commodities.

Experts said that the next short-term target stands at $1,160 and prices will be higher at the end of the year than they are now as the market starts to price in that the Fed’s language will unlikely change from now on.

Traders said stop-loss orders - automatic sale orders placed at pre-set levels to limit losses - were triggered when gold was sitting on the edge of $1,200. Others said that a lot of funds and institutions are required to close their positions ahead of the end of the quarter, causing heavy liquidation.

Gold is down 25 percent for the April-June period, its biggest quarterly loss ever.