Gold is viewed as a secure investment that can safeguard your portfolio during periods of increased market instability. Although it may not experience substantial long-term growth when compared to riskier, high-reward investments, it is known for preserving its value over time. If you belong to precious metals investors, continue reading. We will examine the factors that impact 1 tola gold price in Pakistan.
Last Week’s Gold Market Performance
The 1 tola gold price in Pakistan (24K) started the week at Rs 218200 and ended the week at Rs 215000.
1. U.S. Interest Rates will affect 1 tola gold price in Pakistan
Gold prices experienced a decline marking a continuation of their recent slump. This drop is related to ongoing concerns about increasing interest rates, spurred by hawkish signals from the Federal Reserve, which has led investors to show a preference for the US dollar.
The US dollar has reached its highest point, effectively supplanting gold as a favored safe-haven asset in a year marked by rising interest rates. With the Federal Reserve now indicating another rate hike in 2023 and fewer rate cuts in the following year, this trend is expected to persist.
The rise in Treasury yields has also negatively impacted gold’s attractiveness, with the 10-year benchmark hitting a 16-year high this week.
The increasing interest rates are raising the opportunity cost associated with investing in gold and other assets that do not yield interest. This factor has negatively impacted gold over the past year.
The possibility of US interest rates remaining elevated for an extended period further clouds the outlook for a recovery in gold prices. Likewise, experts also think that these events would also put more pressure on the 1 tola gold price in Pakistan.
2. PKR Devaluation will affect the Gold Market
Pakistani Rupee has continued its upward trend as it has rebounded by over 6% after reaching a record low of 307.1 against the American dollar in the first week of September.
However, the US dollar has considerably improved its position internationally by reaching a 10-month high as compared to other main world currencies this week. The strong currency is a good omen for the Pakistani economy but experts believe it is temporary. As fundamentals of the economy are very weak and can make things tough for the country in upcoming weeks. Here, it is the situation that will put extra pressure on the 1 tola gold price in Pakistan and will decrease more this week.
3. High inflation will favor 1 tola gold price in Pakistan
According to the ADB report, in the fiscal year 2024, inflation is expected to reach 25%, which is a substantial increase compared to the previous projection of 15%. This inflation rate surpasses the central bank’s target range by a considerable margin and is significantly above the intended target. It stands as the highest inflation rate in Asia, far exceeding the projected 10% rate for any other economy.
Gold experts think that a high inflation rate will favor the market as we might see an increase in the 1 tola gold price in Pakistan.
4. Troubling Pakistani Economy will affect gold prices
The Asian Development Outlook has made slight downward adjustments to the economic growth forecast, now standing at 1.9%. However, it has significantly raised the inflation projection to 25% for the current fiscal year. The report anticipates an impending rise in interest rates and recommends a fiscal consolidation plan, which includes reduced spending on defense and energy subsidies.
Furthermore, the report highlights that while currencies in developing Asian economies have experienced modest depreciation, Pakistan’s currency has seen a substantial devaluation of 30%. In contrast to other regional economies, Pakistan has witnessed a decrease in foreign remittances.
The ADB underscores the exceptionally high downside risks to Pakistan’s economic prospects. Previously, Pakistan’s economic outlook was relatively unfavorable only within the South Asian region, but ongoing economic challenges have pushed the country closer to the bottom of the Asian rankings. It is a perfect time for gold investors as 1 tola gold price in Pakistan could increase in the next few weeks.
Gold is a low-risk, secure investment, albeit with relatively modest returns. If you’re uncertain about whether gold aligns with your financial objectives or require assistance with a gold investment, it’s advisable to consult an investment advisor or financial planner. They can provide guidance to ensure you make the best decision in line with your specific financial goals.
Likewise, Pakistani investors who are planning to invest in this precious metal should get professional advice before anything else.
By doing that they can easily take advantage of fluctuations of 1 tola gold price in Pakistan as they have increased from 129000 to over 219000 since March 2022.