Precious metals like gold have served currency forms, investment vehicles, and prosperity symbols. The main factors inviting investors to these metals include their extensive track record as a dependable store of value, their minimal correlation to often volatile financial markets, and their effectiveness as a hedge against inflation. But, folks investing in precious metals must be conscious of potential challenges such as liquidity problems and a lack of yield generation.
Given the recent upward movement in inflation rates from traditionally low levels and the mounting financial markets uncertainty, it is quite obvious that interest in gold would see an increase.
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 Gold Market Performance
The 1 tola gold price in Pakistan (24K) started the week at Rs. 215,500 and ended the week at Rs 218000.
1. Federal Reserve’s Policy Will Play Their Part
Gold reached a new record high this week, spurred by remarks from Jerome Powell affirming that the current interest rate levels are effectively controlling inflation. The precious metal briefly surged to nearly $2,150 per ounce before experiencing a pullback below $2,070. The upswing was primarily driven by the Federal Reserve Chair’s recent comments on inflationary pressures remaining manageable.
Gold prices have maintained an upward trajectory for two successive months, partially driven by current tensions in the Middle East, amplifying demand for the safe-haven investment option. Geopolitical uncertainties often lead to stronger performances by gold and other precious metals due to their reputation as reliable stores of value.
Consequently, the bullion has seen a 4.15% increase over the past month and a remarkable 13.4% surge since the beginning of 2023. This positions gold for its most impressive annual performance since 2020 when its value soared by over 25% amid the market upheaval triggered by the COVID-19 pandemic.
In October, the headline inflation rate saw an unexpected decrease to 3.2%. Additionally, the latest jobless claims report indicated a cooling labor market, fostering hopes of a more dovish approach and a potential end to the tightening cycle, thereby increasing investor appetite for riskier assets. This sentiment propelled Bitcoin above the $42,000 mark on Monday and lifted the S&P 500 index to a three-month high. The above mentioned economic factors could eventually put pressure on international gold prices and is likely to decrease the 1 tola gold price in Pakistan too.
2. PKR Depreciation will Increase 1 tola gold price in Pakistan
The Pakistani rupee continued its upward trend against the US Dollar in the current week. It opened at 285 and showed bullish performance, reaching 283 against the dollar after a gain of approximately Rs. 1.
At the close, the PKR strengthened by 0.15 percent, finishing at 284.53 after gaining 44 paisa against the dollar.
In summary, the rupee has declined by nearly Rs. 67 since January 2023 and has faced a decrease of over Rs. 114 against the US Dollar since April 2022.
Experts believe that this estimated currency depreciation will increase the 1 tola gold price in Pakistan.
3. Gold Prices will be affected by the Local Economy
Throughout 2023, Pakistan has experienced a fluctuating economic path, oscillating between concerns about default and efforts focused on mitigation. Factors like political instability, rising worldwide goods prices, and the tightening of both external and domestic financing circumstances have contributed to less positive economic projections for 2024. The Asian Development Bank expects a 1.9 % GDP growth, the World Bank estimates a 1.7 %, and the IMF projects a growth rate of 2.5 %.
Pakistan still faces significant challenges. Looking beyond the current IMF program, there are ongoing concerns about the magnitude and sources of financing required to meet the substantial external payment obligations. Repaying $77 billion in external debt from 2023 to 2026 is a considerable burden for an economy of $350 billion. The path ahead until 2028 will be arduous. Attaining an ambitious growth target of five percent demands unwavering political determination, sustained policy reforms, and innovative solutions focused on enhancing productivity, revenue, and financing. It is crucial for Pakistan to promptly shift its economic and financial policy approach from short-term mitigation to building enduring resilience.
Therefore, it is the best time for bullion investors to take advantage of the current situation and invest in gold. Since, it is the time when safe haven demand of the precious metals will increase 1 tola gold price in Pakistan.
4. High Inflation still Persists
Pakistan saw a surge in the yearly inflation rate, reaching 29.2%, as compared to the last month’s increase of 26.9% in November 2023. This uptick was mainly driven by a significant increase in the costs of housing and utilities, which rose quickly from 20.5% in October to 33% in November this year. Food inflation also saw an increase, reaching 28%, up from 26.8% in the last month. On the other hand, inflation slowed down in numerous classes, such as alcoholic beverages and tobacco (82.8% compared to 84.6%), recreation and culture (53.6% compared to 56.3%), hotels and restaurants (31.5% compared to 33.1%), and transport (26.5% compared to 31.3%). Meanwhile, the price growth for communication remained constant at 7.4%.
Experts believe that 1 tola gold price in Pakistan could increase in next few weeks due to high inflation in the country.
The primary consideration in the process of opening an investment account is the accessibility of the desired assets. Once this criterion is met, the decision-making process between various accounts primarily involves comparing fees and capabilities. When engaging in financial derivative investments in silver and gold, many brokers can fulfill this requirement with relatively low costs. Additionally, you should factor in the mark-ups and fees expected by the dealer. It is advisable to thoroughly review the disclosures and fee schedules of potential candidates once you have narrowed down your search to a few promising options.
Nevertheless, it is recommended to consult with your financial advisor or accountant to verify that any potential investments align with your overall long-term objectives. Considering the substantial rise in the price of 1 tola gold price in Pakistan, which has surged from 129,000 to well over 200,000 Pakistani Rupees per tola since March 2022, precious metals may be a viable option.