6 factors influencing Gold price in Pakistan

Wearing gold jewelry is a fantasy of every Pakistani female. No marriage ceremony is complete without gold made products such as lockets, bangles and bracelets, etc. These items are available in a wide range of designs and varieties. 

Wearing gold made products is a sign of a woman’s style and appreciation. They not only accentuate a female’s femininity and attractiveness but also serve as reassurance that she is respected and loved as a whole. If she ever found herself alone, unsupported, or unprotected by fate, this precious metal could buy her time, food, and shelter. As, the high liquidity value of gold has long been valued as a security for daughters in case of hardship.

Other than that gold is also a popular investment option for Pakistani investors, especially in times of economic downturns and political uncertainties. Investors often use gold to create diverse portfolios with maximum profit returns. Gold is an amazing investment option but investors often get perplexed due to uneven fluctuations of gold price in Pakistan.

If you are a gold buyer or investor and worried about daily price fluctuations, then you must know the reasons for these fluctuations. If you want to get detailed information about them then you are at the right place as we have compiled a list of factors affecting gold price in Pakistan.


Interest Rates 

The gold price in Pakistan is quite  dependent on the monetary policy updates made by the state bank of Pakistan.  Gold prices increase with the decrease in interest rates as the opportunity cost of avoiding interest-based assets is modest, making gold an appealing investment prospect despite its 0% yield. 

Opportunity cost is the concept of forgoing a nearly certain profit from one investment in favor of the possibility of a bigger profit from another. Bonds and certificates of deposit (CDs) are occasionally paying nominal yields that are lower than the national inflation rate while interest rates remain close to their historical lows. Nominal profits result, but actual financial losses follow.

On the other hand the gold price in Pakistan responds negatively if the state bank adopts a position of increasing rates as soon as the opportunity cost of forgoing interest-bearing assets increases. The opportunity cost of choosing gold over interest-based assets remains low. Moreover, gold prices have a tendency to  increase if the FOMC suggests that rates will remain unchanged.

Economic Situation

Economic conditions directly affect the gold price in Pakistan as people start buying gold to hedge against economic risks in recessionary times. The objective of a hedge asset is to safeguard your funds from dangerous situations. The requirement of getting protection against it is totally dependent on the risk of loss. Just take an example of the Recession 2008 when 1 tola gold price in Pakistan reached all-time high on the back of weak economic conditions worldwide.

Likewise, a better world economy with low unemployment, job growth, booming manufacturing, and GDP growth above 2% tends to drive down gold prices. Strong economic expansion suggests that the State Bank would tighten monetary policy, which would have an effect on the opportunity cost dynamic discussed above. On the other hand, low interest rates and higher gold prices may result from weaker jobs growth, rising unemployment, worse manufacturing data, and sluggish GDP growth.

Gold Demand and Supply

It is a well known economics principle that supply and demand  of any commodity affects 1 tola gold price in Pakistan.

Similar to any other item or service, prices tend to rise when there is a rise in demand and a corresponding decrease in supply. On the other hand, a surplus of an item or service combined with weak or stagnant demand may cause prices to decline.

For instance: Gold is considered as the most essential metal used in jewelry making. As it never tarnishes, rusts or corrodes. Due to its useful qualities and its luster it is used for jewelry .In the subcontinent, gold is widely used in ornaments and Shadi season increases the demand  and often gold price in Pakistan. 

Political Uncertainty 

The lingering Russia-Ukraine war is fueling the ‘safe-haven demand’ for the precious metal everywhere. For instance : The 1 tola gold price in Pakistan rose from Rs 125700 to Rs 129400 in just 30 days after the start of the Ukraine war in February 2022 . The current 1 tola gold price in Pakistan has crossed the Rs 150000 mark.

Right now the USA and its allies are planning to impose additional sanctions on Russia and that would further destabilize the region. These geopolitical developments will fuel tensions further and can even extend the surge in the global inflationary prices. This might well attract safe-haven demand for gold in the next few weeks. 

Rupee Fluctuations

The movement of currencies, particularly the U.S. dollar with respect to the Pakistani Rupees also influences the gold price in Pakistan . For instance : There was a 32 % increase in the US dollar value vs PKR  since March 2022. Likewise the The 1 tola gold price in Pakistan has increased by 19 % since March ,2022. 

Because other currencies and commodities around the world appreciate in value when the dollar declines, there is a tendency for 1 tola gold price in Pakistan to rise. On the contrary, a booming U.S. economy is frequently the cause of the dollar’s rising. Due to the inverse link between gold and the US dollar, it also drives down gold prices. 

Stock Bears and Gold Market

In a bear market, stockholders frequently sell off their holdings when values drop to avoid further financial loss. They will now resort to gold and silver as safe assets for risk hedging in order to maintain the balance of their portfolios. Historically, 1 tola gold price in Pakistan increases during market downturns.

Same has happened during subprime mortgage crisis of 2008, and same is happening now. The KSE-100 index measures the Pakistan stock market and it has dipped from 44803 points to 41772 points since the start of Ukraine war in February  2022. In the same time period ,1 tola gold price in Pakistan rose by 19  % .

Final Word

Undoubtedly, gold is precious commodity and it is always good to have it in your investment portfolio . But it is also important to keep an eye on reasons affecting 1 tola gold price in Pakistan to get maximum benefits out of this investment option.


Leave a Comment

Do you want  solutions for your social and psychological problems?

Then Subscribe to our newsletter