It’s natural and wise for Pakistani investors to question the viability of an asset as a good investment, particularly in the case of gold, an inert metal that doesn’t generate interest. However, the appeal of owning physical gold extends beyond the potential for price appreciation. Gold bullion presents unique advantages not easily found in other investments, providing investors with a certain level of empowerment. One of these reasons is the significant 1 tola gold price in Pakistan increase in the times of economic uncertainty.
Some people think that it doesn’t yield interest or dividends, making some argue it’s not a lucrative investment. However, this perspective misses the point. Gold isn’t designed to generate such returns, and that’s actually a positive aspect.Possessing gold means being exempt from concerns about earnings reports, fluctuations in dividend and interest payments, or the dissatisfaction of shareholders. It stands out among assets in that these factors don’t apply, allowing it to fulfill its historical role of preserving value for thousands of years.
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. 214,000 and ended the week at Rs 213500.
1. Gold Prices Rose Due to Gulf war
Gold prices stabilized on Thursday, interrupting a recent recovery rally in response to stronger-than-expected U.S. retail sales data that introduced uncertainty regarding the trajectory of U.S. monetary policy.
The precious metal experienced a minor decline on Wednesday following two consecutive days of robust gains. This decline occurred as the U.S. dollar rebounded from a 2-½ month low, and Treasury yields halted their recent downturn.
The release of U.S. retail sales data overnight revealed the continued resilience of retail spending through October, countering optimism about a recent decline in U.S. inflation. Despite the decline, inflation levels remained notably above the Federal Reserve’s 2% annual target. The retail sales data prompted a resurgence in the dollar and Treasury yields, exerting pressure on gold and interrupting its two-day rally.
While lower than expected inflation readings in start of the week had made some experts to speculate that the Federal Reserve might halt interest rate increases, Wednesday’s retail sales data increased doubts about future increase in rates. Although the Fed has given a clear indication of adopting a data-driven approach to future rate hikes, but still recent statements from Fed officials makes us think that rates will stay higher for a longer period of time.
This situation is less favorable for bullion market, as high rates rise the opportunity cost of investing in the gold. Such trends have constrained significant gains in gold throughout the year, with prices remaining below the coveted $2,000 per ounce level.
The above mentioned political and economic trends would eventually put pressure on gold prices and is likely to decrease the 1 tola gold price in Pakistan too.
2. Temporary Appreciation in the Domestic Currency will decrease 1 tola gold price in Pakistan
The Pakistan currency is continuously depreciating and it is now at 287.43 as compared to the US dollar.The variations in currency values underscore the ever-changing character of the foreign exchange market and its responsiveness to diverse economic factors. Investors and traders remain vigilant about these shifts, adjusting their approaches to align with market dynamics. Furthermore, the fluctuations in currency values emphasize the significance of economic policies and global factors that shape exchange rates, affecting both domestic and international trade.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 Curse for Pakistan
Pakistan has successfully achieved the benchmarks set by the International Monetary Fund (IMF) to qualify for the upcoming disbursement within the $3 billion bailout package. This accomplishment has instilled confidence in the economy just months before the country is set to conduct elections.
Gold experts think that this capital inflow will favor the market as we might see a decrease in the 1 tola gold price in Pakistan.
4. High Inflation
The State Bank of Pakistan (SBP) recognizes the difficulty in managing inflation but has upheld its projection of an average inflation rate of 20-22% for the fiscal year 2023-24. The SBP anticipates a significant decline in inflation from January 1, 2024. In October 2023, the Consumer Price Index (CPI), which gauges the monthly fluctuations in prices of a set of goods and services, registered a 10-month low at 26.9%, following a peak of 28.4% in September 2023..Experts believe that 1 tola gold price in Pakistan could increase in next few weeks due to high inflation.
Historically, gold has tended to increase in value during significant stock market downturns. It’s worth noting that the most substantial drop in the early 1980s, amounting to a 46% decline, occurred just after gold experienced its most significant period of bullish activity. In contrast, other precious metals have generally not shown strong performance during periods of stock market sell-offs. In this situation, it’s essential to consult with advisors who can help you navigate the variations in 1 tola gold price in Pakistan. The fluctuations have seen a significant increase, rising from 129,000 to well over 200,000 Pakistani Rupees per tola since March 2022.