Investors considere gold a secure refuge for them. It acts as a hedge against inflation, adds diversity to your investment portfolio, and provides stability to your holdings during global crises.
These are frequently mentioned justifications for investing in gold, and many of these circumstances are prevalent today. For example, despite the StateBank’s efforts to control inflation, rates remain high and might continue to weigh on the economy in 2024.
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 214400.
1. Gold Prices Rose Due to Gulf war
With factors such as war, debt, the Dollar, and interest rates influencing Gold prices significantly, what lies ahead for its value?
The positive news is that the current drop is likely forming a significant right shoulder of a substantial inverse H&S pattern. The low point of this right shoulder is expected to be around the $1930 zone, potentially ranging from $1900 to $1950. This drop is expected to be sharp and might last about a week. Following this, there is an anticipation of a multi-month rise in Gold prices, reaching levels such as $2080, $2200, and $2480.
Additionally, there seems to be a big Head and Shoulders top forming for interest rates. The key observation is that a substantial low point for Gold is likely to align with a high point for interest rates. Typically, US rates and Gold move inversely, except during extreme events. For example, both Gold and rates surged during the Gaza war. Now, with the shock of that event subsiding, Gold is experiencing fluctuations in response to short-term rallies in rates, but not rallying significantly when rates drop. In essence, the relationship between rates and Gold is stabilizing, at least for the time being.
However, it’s worth noting that the unsettling 2021-2025 war cycle still has 26 months remaining, suggesting that more distressing events are likely to occur, surprising nearly everyone in 2024 and 2025. These events are highly likely to become significant catalysts for Gold’s price surge.The above mentioned political trends would eventually put pressure on gold prices and 1 tola gold price in Pakistan is likely to rise too.
2. Temporary Appreciation in the Domestic Currency will decrease 1 tola gold price in Pakistan
In recent times, the Pakistani Rupee (PKR) has experienced significant fluctuations against the US dollar, prompting a need to explore the underlying reasons behind these changes. Although there was a period of notable appreciation, the rupee has been consistently depreciating, leading economists and policymakers to analyze the causes and potential solutions.
Not too long ago, the PKR managed to achieve an impressive exchange rate of Rs 277 against the US dollar, marking a significant milestone for Pakistan’s economy. Several factors influenced the current period of relative strength . The implementation of various economic reforms aimed at enhancing fiscal and monetary policies played a crucial role in bolstering the rupee. These reforms included measures to reduce the fiscal deficit and promote responsible monetary policies.
Furthermore, a concerted effort to counter dollar hoarding and suppress the activities of smuggling networks played a key role in restoring stability between the US dollar and PKR. A targeted operation was launched in the Khyber Pakhtunkhwa (KPK) province, leading to the apprehension of numerous individuals engaged in illegal cross-border trafficking of US currency.Experts believe that the rceent currency depreciatrion will put extra pressure on the 1 tola gold price in Pakistan increasing its price.
3. Fragile Economy is Curse for Pakistan
The rupee witnessed a significant recovery following the interim Pakistani administration’s actions in August, which included crackdowns on dollar hoarding and smuggling.
However, the national currency started depreciating again after October 20, when the market closed at Rs278.80. Meanwhile, the PSX showed a bullish trend initially on Tuesday, surpassing the 54,000-mark. However, as investors adjusted their positions, the market experienced a decline of 124.63 points, closing at 53,735.73.
The ongoing negotiations between the government and the IMF would surely positively impact both the economy and stock markets.
Bullion market experts think that fragile economy will favor the market as we might see an increase in the 1 tola gold price in Pakistan.
4. High Inflation
According to PBS ,Pakistan encountered another rise in inflation this month as it increased by 26.89 % compared to same month last year. The Pakistan Bureau of Statistics’ data shown a 1.08 percent month-on-month rise in CPI inflation last month.
The statistics also shown a 1.07 % increase in urban inflation and a 1.01 % rise in rural inflation on monthly basis. This data reveals that there was a decrease after an incessant inflationary trend from July to September 2023.
The government’s response to the escalating inflation included a decision made last month to reduce fuel prices and maintain the existing monetary policy, aiming to curb the rising inflation. The data highlighted that the food prices drove the inflation in October ,2023.
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 possibly decrease volatility and offer a feeling of security over time. But, it’s extremely vital to note that latest gold prices are nearing historical peaks, even after the current decrease.
In this scenario, it’s crucial to seek guidance from advisors who can assist you in managing the fluctuations in the price of 1 tola gold in Pakistan. These fluctuations have experienced a substantial rise, surging from 129,000 to over 200,000 Pakistani Rupees per tola since March 2022.