4 things Influencing 1 tola gold price in Pakistan
Numerous investors view gold as the ultimate safe-haven investment. During market downturns where stock, bond, and property prices plummet, gold often maintains its value, sometimes even rising as anxious investors flock to purchase it.Furthermore, investing in gold serves as a method to diversify your investment portfolio. By holding a diverse range of assets, including gold, you can shield the value of your investments as different assets yield varied returns.However, investors should know that it requires a comprehensive evaluation of where, gold aligns with your overall investment strategy and whether it aligns with your objectives for diversifying your assets. If you are also a gold investor, then keep reading as we will examine the factors that impact 1 tola gold price in Pakistan.
Last Week’s Gold Market Performance
The 1 tola gold price in Pakistan (24K) started the week at Rs 195000 and ended the week at Rs 197000.
1. Gold Prices Rose Due to the Gulf War
Concerns about an escalation in the Israel-Hamas conflict significantly boosted gold prices over the past week due to increased demand for traditional safe-haven assets. Gold had recorded a 5% increase in the previous week.
However, this improved demand has been diminished in recent sessions, especially amid renewed fears about rising U.S. interest rates. The latest retail sales data has increased worries about consistent inflation, which could, in turn, force the Federal Reserve to take a hawkish stance about interest rates.
As a result, this week’s focus is on various U.S. economic indicators and key Fed officials, with particular attention on Chair Jerome Powell’s address scheduled for Thursday. Given the recent uptick in inflation, any indications of a more hawkish approach from Powell will be closely scrutinized.
It’s worth noting that rising interest rates tend to negatively impact gold prices by increasing the opportunity cost of investing in the precious metal. This trend would eventually put pressure on gold prices and is likely to increase the 1 tola gold price in Pakistan too.
2. Temporary Appreciation in the Domestic Currency will decrease 1 tola gold price in Pakistan
Pakistani rupee yesterday experienced a small depreciation in the forex market, ending a month-long phase of daily increases. State Bank of Pakistan data showed that there was a slight weakness of 20 paise as compared to the US dollar, closing at Rs 277.03. It was a 0.07% depreciation against the last day’s closing rate of Rs 276.83.
Pakistani rupee reached its lowest point on September 5, when its rate was Rs 307.09 per dollar. However, the severe crackdown on money exchangers involved in illegal foreign exchange trading and temporary central bank financial reforms helped it to recover in the forex market. Since, then it has appreciated by Rs 30.26, indicating a gain of 9.85% prior to a slight depreciation yesterday. Experts believe that this deprecation would put extra pressure on the 1 tola gold price in Pakistan increasing its price.
3. High inflation is Dangerous for Pakistan’s Economy
Pakistan’s inflation for September jumped to 31.4% year-on-year on the back of high energy and fuel prices, official government data showed. Almost 43% of Pakistan’s inflation (CPI) basket is directly related to Pakistan rupee-U.S. dollar parity.
There is a close connection between inflation and currency’s value as rising costs reduce the buying power of the currency.
But with the rupee strengthening now, experts expect that the South Asian nation’s CPI to “ease off a bit but with some lag. Gold experts think that a high inflation rate will favor the market as we might see an increase in the 1 tola gold price in Pakistan.
4. The troubled Pakistani Economy will positively Impact Gold Prices in Pakistan
Pakistan’s fragile economy is in trouble due to large debt and deteriorating foreign reserves. The World Bank estimates that Pakistan’s real GDP will contract by 0.6% in the current year, a noteworthy decline from last year’s 6.1% growth.
Furthermore, the country has to cope with dangerous inflation. As per the World Bank report, Pakistan’s average headline inflation reached the highest level of 29.2% year-on-year in FY23, considerably above last year’s 12.2%. The considerable increase is due to currency devaluation, decreased local subsidies for fuel and electricity, and disruptions in the supply chain.
Experts believe that the 1 tola gold price in Pakistan could increase in the next few weeks due to economic and political uncertainty.
Final Words
Inflation gradually diminishes the actual worth of a currency. In simpler terms, the purchasing power of a dollar today is lower than it was a decade ago. However, gold offers a means of safeguarding the genuine value of your wealth against inflation.
In times of elevated inflation, which is currently being experienced, investors must turn to gold as a tangible asset that maintains its value. Periods of high inflation typically coincide with higher interest rates and overall economic instability. Consequently, gold is perceived as a secure asset, and theoretically, heightened demand leads to an increase in its price. However, investors must also consult advisors who can help them navigate the fluctuations in 1 tola gold price in Pakistan, which has seen a significant increase from 129,000 to over 200,000 Pakistani Rupees per tola since March 2022.