To different extents, gold can serve as a safeguard in the face of a potential economic or market decline and prolonged periods of increasing inflation. Differentiating between the uses, economic sensitivities, and technical characteristics of this precious metal can assist in deciding which one is more advantageous for your investment portfolio. A significant number of individuals, particularly in South Asia, acquire gold jewelry with the dual intention of personal possession and investment. Often, individuals opt to sell when prices escalate or exchange existing jewelry for new pieces when rates are favorable.
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. 217,500 and ended the week at Rs 217400.
1. Federal Reserve Will Play Their Part
Gold prices remained below crucial levels as market caution toward non-yielding assets intensified ahead of the Federal Reserve’s last meeting for the year.
The recent indications of strength in the labor market and persistent U.S. inflation dampened expectations of an early interest rate cut by the central bank in 2024. While the Fed is anticipated to maintain current interest rates on Wednesday, the outlook for 2024 remains uncertain.
The unpredictability surrounding the Fed has led to significant fluctuations in gold prices this month. The precious metal briefly surged to record highs exceeding $2,100 per ounce before experiencing a substantial pullback.
Recently, gold prices have shown a decline, mostly as the dollar regained strength in anticipation of the Fed’s decisions. Resultantly, precious metal has lost crucial $2,000 per ounce level.
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 Devaluation will Increase 1 tola gold price in Pakistan
The Pakistani rupee has shown a steep decline in 2023, as it depreciated by approximately 55 rupees, dropping from 226 to the current range of 281-285 against the dollar. The decline in the currency this year was caused by significant trade imbalance, emerging due to the relaxation of import restrictions and the clearance of backlogs for imported goods. It is a known fact that currency markets are affected by complex factors such as macro-economic indicators, governmental regulations, geopolitics, and market sentiments.
Experts believe that this estimated currency depreciation will increase the 1 tola gold price in Pakistan.
3. Uncertain Economic and Political Environment
The nation is experiencing a rising tide of economic instability and uncertainty, with an unofficial survey indicating that 60% of Pakistanis have lost hope in a brighter future, signaling a significant lack of confidence in the current leadership. Failed economic and political policies have increased country’s economic woes , leading Pakistan further into a precarious situation. Notably, none of the three major political parties. On the other hand, economic conditions are also getting bad to wrose. Inflation has reached unprecedented levels, breaking previous records.
Taking an objective view, it becomes apparent that the political parties entrusted with the people’s mandate have fallen short, delivering nothing but disappointment. The entire economic system now seems under the influence of the International Monetary Fund (IMF). The prediction of a 25% inflation rate this year has cast a shadow on achieving the targeted GDP ratio, making it challenging for institutions to meet their set objectives.
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. Highly Inflationary Environment
Pakistan has faced persistent challenges in its economy, marked by significant inflationary pressures. The consumer price index-based inflation has constantly crossed 20% since June 2022, touching a record high of 38% in May 2023.
Both the central bank and the (IMF) predict a reduction in inflation during the current financial year 2024. However, despite efforts, inflation stood at 29.2% in November, partly attributed to increased energy prices aimed at fulfilling reform targets.
The economy has been affected by elevated borrowing costs, leading to a sluggish growth rate of approximately 2%. Despite this, investors appear optimistic, having factored in the anticipated peak in interest rates. Additionally, confidence has been bolstered by expectations of the successful completion of the IMF program, resulting in positive trends in stock markets and currency values.
Experts believe that 1 tola gold price in Pakistan could increase in next few weeks due to high inflation in the country.
For those still inclined to invest in gold, we offer a more convenient and cost-effective way to integrate gold into a portfolio.
Gold attracts investors due to its simplicity and widespread understanding even it is available at high prices. But I emphasize that underlying emotional reasons typically drive such preferences.
I recommend a long-term perspective and recognizing that market volatility is a normal occurrence. Rather than hastily purchasing gold bars, adhering to an established investment plan is often the most beneficial course of action for a portfolio.
Nevertheless, I recommend to consult with your financial advisor or accountant to confirm that any potential investments are in line with your overall long-term objectives. Investing in precious metals could be a viable choice in Pakistan, given the substantial rise in the price of 1 tola gold, increasing from 129,000 to well over 200,000 Pakistani Rupees per tola since March 2022.