4 things affecting 1 tola gold price in Pakistan
Pakistanis love to invest in gold as they consider it a safe haven during times of uncertainties and recession. However, they have to be extremely careful while investing in this choice as 1 tola gold price in Pakistan fluctuates. Hence, if you are contemplating investing in gold within Pakistan, it is crucial to monitor the elements that influence its prices and worth. If you are also considering venturing into the world of gold investment but lack knowledge on how to analyze its market, then continue reading as we will delve into the four most significant factors that impact the 1 tola gold price in Pakistan. So, grab a cup of tea and join us as we embark on an exploration of the promising domain of gold investment in Pakistan!
Gold Market Performance last week
The 1 tola gold price in Pakistan (24K) started the week at Rs 231700 and ended the week at Rs 226100.
1.International gold demand and Supply
Gold was on track for a second consecutive weekly increase on Friday, marking its third rise in four days, as market participants speculated that the Federal Reserve would pause its cycle of interest rate hikes for the first time in 18 months.
The front-month gold contract on the New York Comex settled at $1975.90 per ounce, registering a decrease of $2.70, or 0.14%, for the day. Over the week, it recorded a 0.4% gain, similar to the previous week. The spot price of gold which reveals physical trades in bullion and is closely monitored by some traders, settled at $1,960.97, showing a decline of $4.65, or 0.2%, for the day. Weekly performance for spot gold showed a 0.7% increase, building upon the nearly unchanged closing from the previous week.
Despite higher daily joblessness claims in Americans, the likelihood of the Federal Reserve pausing its rate hike became more prominent on Friday. As per Investing.com’s Fed Rate Monitor Tool, there is a 70.1% probability that the central bank will abstain from raising rates during its strategy-makers’ meeting on June 14.
Ed Moya, an analyst at the online trading platform OANDA, attributed the recent volatility in gold to the lack of conviction about the economy, which prevented the market from leaning decisively in either direction.
Moya further added that the Consumer Price Index (CPI) reading for May, scheduled for release on Tuesday, could determine whether gold continues to rise towards potential record highs or experiences further correction. Therefore, these factors will also affect the 1 tola gold price in Pakistan.
2.High USD to PKR exchange rate
According to Krustins, despite the stability of the currency in recent months, the pressure on the reserves of the State Bank of Pakistan has been under control. This indicates that there will be minimal interventions to support the currency.
Finance Minister Ishaq Dar has set an optimistic GDP target of 3.5 % for the fiscal year 2023-24.
The Pakistani rupee has maintained a stable position in the last one week but its US-PKR value is still hovering between 284 and 287 in the inter-bank market.
Additionally, the foreign exchange reserves of the central bank went under $4 billion, raising concerns about Pakistan’s ability to manage its debt and repay loans. All these factors will encourage investors to buy precious metals and that will further push the 1 tola gold price in Pakistan upwards.
3.Inflation is at its highest level in the last 75 years
According to the majority of experts, there is an agreement that there is an immediate requirement of increasing the interest rates as there was a decline in global commodity prices.
The monthly inflation in Pakistan reached a new level of 37.97% in May 2023, marking a record for the second successive month and that is the highest in the whole subcontinent.
Economic experts believe that the inflation figures might decrease due to the high base effect. Moreover, they anticipate inflation to be around 30% in June 2023, compared to the 38% recorded in May. Additionally, they expect initial GDP growth of 0.3% is anticipated to be revised to negative once the final or revised GDP figures are released next year. Here, gold experts believe that high inflation will encourage to invest in the bullion market and that will push the 1 tola gold price in Pakistan upwards.
4.Pakistani Economy and Politics is uncertain
On Friday, the PML-N-led government presented a federal budget of Rs14.5 trillion that revealed a budget deficit totaling 6% of the country’s (GDP). The main aim of the budget is to realize a GDP growth target of 3.5% and retain inflation at 21%. Economic analysts expect that the State Bank will keep the current interest rate in the upcoming weeks, as per the market expectations due to the current high level of inflation.
The State Bank forex reserves have seen a steep decline in the last few months and have reached $3.9 billion, primarily due to external debt payments. The World Bank’s current report on Pakistan’s economy has adjusted its GDP forecast for FY23 from 1.6% to 0.4%. The report has given several reasons for this changed forecast such as 2022 floods, social and political tensions, high inflation, and policy uncertainty impacting the country’s economy. The recessionary economic environment will create an ideal setting for gold investment and it will certainly increase the 1 tola gold price in Pakistan.
At present, Pakistan is engaged in negotiations with the International Monetary Fund (IMF) to recommence the bailout program, which has encountered a delay during the ninth review. The discussions regarding the staff-level agreement have been extended because it is essential to obtain the required financial assurances to address the imbalance in the country’s payments.
Considering these factors, the gold market will remain cautious, leading investors to adopt a more reserved approach during the week. Additionally, the political uncertainty, particularly the government’s avoidance of provincial elections will directly affect the 1 tola gold price in Pakistan in the current week.
What to do?
The recessionary environment has created ample opportunities for investors as it is quite probable in the increase of the 1 tola gold price in Pakistan. However, investors also have to keep an eye on global factors as the U.S economy is improving and that directly affects the 1 tola gold price in Pakistan.
If you have reservations about owning physical gold, opting for purchasing stocks in a gold mining company could present a more secure option.
If you have confidence in gold as a reliable hedge against inflation, exploring avenues such as investing in coins, bullion, or jewelry can lead you towards attaining wealth through taking advantage of fluctuations in the 1 tola gold price in Pakistan.