Gold is always viewed as a secure investment that can safeguard your portfolio during periods of market instability. Although it may not yield substantial growth compared to high-risk, high-reward investments in the long run, it will maintain its value over time. Therefore, Pakistani investors are heavily investing in the gold market these days and that is influencing 1 tola gold price in Pakistan.
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. 209,000 and ended the week at Rs 213800.
1. Gold Prices Rose Due to Gulf war
The price of Gold (XAU) experienced a 0.66% decline on Tuesday amidst a highly unstable trading session. Initially, the price surged beyond the crucial $2,000 threshold due to renewed geopolitical tensions in the Middle East but eventually retreated. Gold’s failure to sustain above the $2,000 mark indicates market weariness and traders’ fatigue in dealing with robust resistance.
Currently, investors have shifted their attention from the Federal Reserve (Fed) to this week’s policy rate decision and the release of a crucial Nonfarm payrolls report. The XAU/USD experienced a decline during the Asian and early European trading sessions. All eyes are now on the Fed’s policy decision. Investors anticipate the Fed maintaining the benchmark rate unchanged. However, they are keenly watching for updated macroeconomic projections and closely listening to Jerome Powell, the Fed’s Chair, during the press conference at 6:30 p.m. UTC. Any indication from the Fed suggesting readiness for more rate hikes or a plan to maintain tight monetary policies for an extended period would negatively impact gold. Conversely, a more dovish statement or any hints that inflation is no longer a significant concern would positively affect the gold market.
The above mentioned political trends would eventually put pressure on gold prices and is likely to increase the 1 tola gold price in Pakistan too.
2. Recent Depreciation in the Domestic Currency will increase 1 tola gold price in Pakistan
Pakistani rupees experienced a considerable decline in value from early 2022 to mid 2023. Since then, it has remained relatively stable. Efforts made in the previous year to restrict the outflow of capital through import and capital controls led to a redirection of remittance inflows away from official channels. This redirection aggravated the shortage of foreign currency in the country. Therefore, Pakistani rupee has started depreciating again in the currency market.
Experts believe that this currency devaluation will put extra pressure on the 1 tola gold price in Pakistan increasing its price.
3. Fragile Economy is good for 1 tola gold price in Pakistan
The World Bank has provided a careful assessment of Pakistan’s economy for the fiscal year 2023–24, forecasting a modest growth rate of 1.7 percent. The report, titled “South Asia Development Update towards faster, cleaner growth,” underscores the delicate economic conditions in Pakistan. This fragility is attributed to various factors, including a 26 percent decrease in the US dollar value of imports in August 2023 due to reduced demand and import restrictions. These conditions led to shortages in inputs and a 15 percent decline in industrial production by June 2023.
Moreover, the economy contracted by 0.6 percent during the fiscal year 2022–23, primarily due to the effects of the 2022 floods, along with high inflation and challenges related to the balance of payments. Initially implemented to curb the trade deficit, import restrictions disrupted the supply of industrial materials and impeded growth. Although these controls have been lifted as part of an IMF lending program, Pakistan continues to grapple with inflationary pressures, stringent fiscal policies, and significant damage from the floods. The country’s foreign exchange reserves remain limited, leaving it susceptible to external economic shocks.
Gold experts think that high inflation rate will favor the market as we might see an increase in the 1 tola gold price in Pakistan.
4. High Inflation
The CPI headline inflation decreased for the 3rd successive month, dropping from the historic 38.0% in May 2023 to 27.38% in August 2023 on yearly basis. It’s important to highlight that bordering countries faced significantly lower inflation rates in August 2023, with China at 0.1%, India at 6.8%, and Bangladesh at 9.9%.
Experts believe that 1 tola gold price in Pakistan could increase in next few weeks due economic and political uncertainty.
If your portfolio lacks gold, it might be a good idea to purchase some during a market dip to increase your holdings slightly. This can potentially reduce volatility and provide a sense of security over time. However, it’s important to note that current gold prices are close to historical peaks, even after the recent decrease.
In this situation, you must consult advisors who can help you to navigate the fluctuations in 1 tola gold price in Pakistan, which have seen a significant increase from 129,000 to over 200,000 Pakistani Rupees per tola since March 2022.