Gold has always been highly valued as a “safe haven” asset throughout Pakistani history. And it is quite different from other assets like stocks or real estate. This is mainly due to its capability to keep both its worth and liquidity even in times of economic recession.
Actually, it’s quite normal for gold to exhibit an inverse association with major stock market price fluctuations. Pakistani investors often turn to gold during high inflation as they believe it will safeguard their wealth against the mounting goods and services prices along with higher interest rates. In addition to that, this precious metal also could maintain a stable 1 tola gold price in Pakistan over extended periods.
Furthermore, including gold and other precious metals such as silver, platinum, and palladium diversifies your investment portfolio along with offering a strategy for growing the variety of your investments.
In addition to that, gold can operate as a cushion against share volatility, as its value generally does not move in tandem with the fluctuations of the stock market. Moreover, 1 tola gold price in Pakistan even increases during catastrophic events like wars or pandemics disrupting the bourse market. If you’re an investor looking to analyze fluctuating trends of the bullion market, continue reading as we will discuss the important factors manipulating the 1 tola gold price in Pakistan this week.
Last Week Gold Market Performance
The 1 tola gold price in Pakistan (24K) started the week at Rs 221000 and ended the week at Rs 224000.
1. U.S Financial Environment will influence 1 tola gold price in Pakistan
Gold is poised to end lower in the current week due to various factors such as supply, demand, central bank reserves, inflation expectations, and investor risk appetite.
However, there’s one factor that has consistently proven its impact throughout history and that is real interest rates. Real interest rates represent the cost of holding gold in comparison to other investments. When they are low, options like cash and bonds yield little to no return, driving investors to look for alternatives to preserve their wealth.
Conversely, when real interest rates are relatively high, cash and bonds become more attractive due to their potential for significant returns, making the allure of gold, which has limited industrial use, diminish. Besides affecting the opportunity cost of holding gold, interest rates also impact the expenses associated with purchasing gold on margin, a practice common among traders.
Nevertheless, economic signals within the United States, the world’s largest economy, suggest consistent employment levels and a reduction in inflation. These positive economic factors will negatively affect 1 tola gold price in Pakistan.
2. Further Rupee Devaluation Expected
The Pakistani rupee concluded at an all-time low of 299 rupees against the US dollar in the interbank market on Tuesday. This drop was observed after a reduction in import limitations, which led to an increased demand for the dollar as indicated by data from the central bank.
In 2022, Pakistan implemented import constraints to prevent capital outflows from its diminishing foreign reserves. The relaxation in the restrictions was made in June when the IMF approved a $3 billion loan program aimed at helping Pakistan come out of the economic crisis.
Numerous experts at leading brokerage firm Arif Habib believe that the Pakistani rupee will probably fluctuate within the range of 295 to 305 in the upcoming few weeks. They explained that the downward trajectory of the rupee’s value primarily results from the relaxation of import constraints, in addition to the resolution of accumulated backlog related to goods and services.
Moreover, they noted that multinational companies had the opportunity to send back some of their profits, which contributed to the outflow of rupees. They also anticipate further PKR devaluation that will escalate the 1 tola gold price in Pakistan.
3. Pakistan must raise interest rates to curb Inflation
Pakistan’s medium-term inflation has surged by 27.57 % on a year-over-year basis, marking the week ending on August 17. This increase is primarily attributed to a sharp upswing in petroleum prices, as revealed by official data disclosed on Friday. According to a report by Dawn, a Pakistani English-language newspaper, this inflation rate represents a decrease from the previous week’s 30.82 %.
The weekly inflation climbed by 0.78 % while observed on a week-over-week basis maintaining an ascending trajectory for the fourth consecutive week. Notably, the cost of petrol escalated by 6.40 %, while diesel experienced a 7.29 percent increase. Among the 51 items included in the SPI basket, prices of 32 commodities witnessed a rise, seven experienced a decline, and 12 remained unchanged when compared to the previous week. Gold experts believe that this is a perfect time for seeing another increase in the 1 tola gold price in Pakistan.
4. Economic and Political Uncertainty in Pakistan
Pakistan’s eleventh-hour agreement with the International Monetary Fund (IMF) has provided Islamabad with some temporary relief as the nation approaches elections. However, both industries and consumers are still grappling with the same economic challenges they confronted earlier.
Several companies spanning diverse sectors like Sitara Peroxide and Pak Suzuki Motor Company are planning to announce production closures. They attribute these closures to a range of factors, including demand fluctuations and limitations in the supply chain.
In addition to that upward trajectory of power tariffs, increasing circular debt will exacerbate issues for the energy sector. This situation is causing concern among both commercial and domestic electricity users. As the persistently high inflation implies increased material costs and a surge in financing expenses.
Finally, political uncertainty is also posing challenges for the country, especially after the arrest of former Prime Minister Imran Khan. As his party leaders might start street agitation in retaliation. It will further increase political uncertainty and 1 tola gold price in Pakistan.
The ongoing political and economic uncertainty offers a perfect opportunity for making a long-term investment in the bullion market. However, investors must ensure that they have taken their financial advisers on board in their every investment decision. Since investors can get maximum out of fluctuations in 1 tola gold price in Pakistan.