Gold investment has long been a popular choice for investors in Pakistan, with the precious metal being seen as a symbol of wealth and status. There are several reasons why investing in gold in Pakistan can be an attractive option for investors.
If you are also good at investing in gold and want to try your luck again with this precious metal , then keep reading on as we would be discussing factors affecting bullion market in Pakistan this week. It will help you to understand the mechanisms affecting 1 gold price in Pakistan and how you can devise your investing strategy around them.
Global demand and supply
The global demand and supply for gold plays a significant role in determining its price in Pakistan. High global demand directly increases the 1 tola gold price in Pakistan.
According to the research study by Economist, gold demand (excluding OTC) in Q3 increased 28% y-o-y at 1,181t. The yearly demand increased 18% vs. the same period in 2021, coming back to pre-Covid levels.
The Jewelry usage levels reached a healthy 523t, increasing 10% y-o-y regardless of the worsening global economic conditions. Y-t-d demand is slightly firmer (+2%) at 1,454t. As a result, experts predict that in the coming weeks, global gold prices might rise $ 1800/ounce. The international gold market started the week at $ 1809 /ounce and ended the week at the $ 1854/ounce. It indicates the increasing gold prices trend in the international market.
The local Pakistani precious metals market will continue to be impacted by the trend towards increasing global prices.
USD to PKR exchange rate
The US to PKR exchange rate has stabilized a little in the last week on the back of approval of Chinese loan of $ 700 million. The USD to PKR exchange rate started the week at Rs 257 and ended the week at Rs 278. Pakistan has to import gold in order to fulfill its domestic demand. Therefore, appreciation in the dollar value increases the bullion value in the country.
Now money experts again expect that dollar value might rise in upcoming days due to deteriorating local economic and political environment. And that can begin another good time for gold investors.
Interest Rate Increase
State bank of Pakistan has raised its key interest rate by 300 basis points last week surprising the investors .The main goal of this decision is to IMF to release its critical funding.
The interest rate now stands at 20% and it is highest in last three decades. Market experts believe that it will discourage stock investors and gold investors . Moreover ,it will boost banking sector as maximum peole will deposit their money to earn interest income.
SBP has also increased rate by 100 bps to 17% in January 2023.
Inflation is another factor that will affect the 1 tola gold price in Pakistan. It soared further, hitting 31.5% year-on-year in February 2023, highest since 1965. Prices for food and non-alcoholic beverages climbed by 45.07% over the previous year, while those for alcoholic beverages and tobacco increased by 47.59% as a result of higher cigarette taxes. The CPI rose 27.55% year over year in January. Super high inflation will force investors to buy more precious metals and that will increase 1 told gold price in Pakistan.
Political and economic stability
Political crisis is at its peak as current PML-N led government is trying hard to avoid upcoming provincial KPK and Punjab assembly elections. However, it doesn’t seem possible as Supreme court has asked election commission to hold elections as soon as possible according to the 1973 constitution. Political uncertainty might increase as PML-N has started attacking Supreme Court judges and that has further increased conflict between national institutions. Here, federal government has to play its due role to resolve this political crisis as it might cause dangerous conflict between both parties.
On the other hand, Pakistan economy is in tatters as its forex exchange reserves are hovering around $ 3 billion and Moody’s has slashed Pakistan’s credit rating to Caa3 whereas the outlook was switched from negative to stable. Economic and political certainty will surely push 1 tola gold price upwards in the ongoing week.
Before investing in gold, it’s important to consider why you want to invest in gold. Are you looking to hold it as a long-term store of value or as a short-term speculative investment? Your investment goals will influence the type of gold investment you choose.