Gold invesment is the best option for any investor in Pakistan

4 things Influencing 1 tola gold price in Pakistan


It’s natural and prudent for investors to assess whether a particular asset is a worthwhile investment, especially when it comes to gold, given its inert nature and lack of interest-bearing properties.

However, the appeal of owning physical gold extends beyond mere price appreciation. Gold bullion offers distinct advantages that are unparalleled in nearly any other investment, providing Pakistani investors with significant benefits.

If you are gold investor, then keep reading as we will also analyze factors that could impact 1 tola gold price in Pakistan and gold asset.

Last Week Gold Market Performance

The 1 tola gold price in Pakistan (24K) started the week at Rs. 209000 and ended the week at Rs 210,706.

1.   Inflation Data Will Influence gold prices

The gold price saw a 0.45% increase in U.S last week but after that it declined due to concerns about the higher-than-expected inflation in the country, which slashed hopes for an immediate interest rate reduction by the Federal Reserve (Fed).

The recent data that US producer prices rose more than anticipated in January. Additionally, Tuesday’s report indicated that the growth in US consumer prices did not slow down as much as expected.

Even market analysts such as Everett Millman believe that  Fed is not expected to decrease interest rates in March. Therefore gold prices would face hurdles to cross the $2,000 mark.

According to the CME FedWatch Tool, there is only an 11% probability of the Fed easing its monetary policy in March. Market sentiment is also bearish regarding a rate cut in May, with just a 33% chance priced in for that possibility. Despite gold asset being considered a hedge against inflation, high interest rates diminish its appeal since the metal does not generate passive income.

XAU/USD has been climbing during Asian and early European trading sessions. With a relatively uneventful economic calendar today and bank holidays in both Canada and the US, short-term bullish trends may persist. However, reduced liquidity could lead to unexpected and sharp movements in XAU/USD.

The above mentioned factors can decrease precious metals value in U.S and also 1 tola gold price in Pakistan .

2.   Current Rupee Depreciation will Infuence 1 tola gold price in Pakistan

Unexpectedly, the Pakistani currency experienced a significant drop to a three-week low of Rs279.57 against the US dollar in the interbank market, breaking nearly two weeks of stability. This sudden decrease occurred due to a decrease in foreign currency inflows into the system.

The overvalued currency in the interbank market appears to have reacted to the decreasing open market rates, particularly in light of political uncertainty and its potential implications for obtaining the next IMF loan program, which is essential for stabilizing the local economy.

Gold experts believe that this currency depreciation is good for the gold asset market and will increase the 1 tola gold price in Pakistan.

3.      Tough Economic Conditions in Pakistan

Discussions regarding a new government in Pakistan have eased immediate concerns about instability in the nuclear-armed nation following inconclusive elections last week. However, the risk of a severe economic crisis persists.

An existing $3 billion program from the International Monetary Fund (IMF) is set to expire next month, and securing a new and significantly larger one is widely regarded as the top priority for the incoming administration. Pakistan’s foreign exchange reserves currently amount to approximately $8 billion, barely sufficient to cover two months of essential imports. Nonetheless, this represents an improvement from the $3.1 billion level they had dropped to just over a year ago.

Further pressure on the reserves will come from a $1 billion bond payment due in two months, although the country will also receive a $700 million injection of already-approved IMF funds. Analysts emphasize the critical importance of entering into another IMF program, given Pakistan’s dire foreign exchange reserves in comparison to its substantial upcoming external debt repayments. They stress that there is no viable alternative other than IMF. The above mentioned eocnomic environment can increase the 1 tola gold price in Pakistan.

4.   High Inflation Will Increase 1Tola Gold Price in Pakistan

The recent increase in gas and petroleum oil prices for both households and industrial consumers in February will raise the inflation rate by nearly 0.5 percentage points, reaching approximately 25% for the current fiscal year 2023-24. This development reduces the likelihood of a minor reduction in the benchmark interest rate in mid-March 2024.

The inflation rate projection does not include the potential impact of political turmoil following the unexpected election results. A prolonged political crisis concerning the formation of a new government at the center, and its subsequent effects, especially any delays in securing a new International Monetary Fund loan program post-April, could further elevate inflation.

The increase in gas prices is expected to deter the smuggling of fertilizer to neighboring countries, which has been detrimental to farmers and consumers. This is anticipated to enhance the supply of urea and DAP within the country, subsequently reducing the necessity for their importation.

Gold experts believe that 1 tola gold price in Pakistan can increase in next few days due to high level of inflation in the country. Since, high inflation influences people to invest in the safe haven gold option.

Final Words

Gold market analysts beleive that it is the best time to enter the bullion market as current political uncertainty has created numerous avenues for the Pakistani investors looking to invest in gold asset. The 1 tola gold price in Pakistan has increased from 129000 to 210000 in just 24 months time. Howover,investors should diversify their portfolio by adding stocks in their investment basket.

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