How do rupee fluctuations affect 1 Tola gold price in Pakistan?
Gold has been categorized as a safe-haven asset along with the US dollar in Pakistan and historically ,investors have always used it as a hedge against political and economic unpredictability.Therefore,investors and consumers keep an eye on 1 tola gold price in Pakistan to guard against any decline in other financial assets during uncertain periods.
Due to this, numerous countries continue to keep substantial gold reserves in their sovereign coffers. Even though gold is no longer utilized as a peg against the US dollar.
Gold consumers also note that there is a close relationship between the value of the Pakistani rupee and the gold price in Pakistan.
If you are a frequent gold user, then keep reading this article as we will be discussing the impact of rupee price fluctuations on the precious metal value.
What is the relationship between the gold price in Pakistan and PKR?
With more than 30 distinct commodities available for trading, the commodities market in Pakistan is extremely active and vibrant. The price movement of other commodities is influenced by international cues, just like the currency market and gold. This is especially true for commodity groups including energy, industrial metals, and precious metals. Commodities have their own set of influencing factors, much like some specific events and causes that have an impact on currency exchange rates.
The same is the case with gold as its demand often increases as the PKR value drops, which leads to an increase in the 1 tola gold price in Pakistan. This is because investors seek out alternate safe-haven investments to put their money in when the value of the PKR declines. Gold also ranks fairly high amongst the list of safe assets.
Let’s analyze the table of both gold and the Pakistani Rupee values to observe if the above claim about their negative association holds true or not. Here’s a table of 1 tola gold price in Pakistan and PKR/USD parity values for some time from Oct 2019 to Oct 2022.
| Date | 1 tola gold price in Pakistan | PKR/USD Parity Values |
| Oct 2019 | 87750 | 156.70 |
| Oct 2020 | 95850 | 164.60 |
| Oct 2021 | 114200 | 169.47 |
| Oct 2022 | 144600 | 228.10 |
The chart clearly shows that as the PKR value declines, there is a considerable increase in demand for gold, which drives up the price of the precious metal. This is because when the value of the currencies decreases, investors look for other safe-haven assets to invest in.
What to do when the gold price in Pakistan fluctuates?
Investors often get confused when they don’t know what to do during fluctuating commodities prices. Here are some of the strategies that can help them hedge their risks during crisis times.
Putting money in gold when the currency market is down
This strategy is could be quite successful because of a negative association between gold and the rupee market. Whenever the currency market is facing a turbulent period, you can direct your money to gold to guarantee that you would make good profits. This works in both ways. Therefore, when gold is not performing, you must put money in either USD or the Pakistan rupee to make an effort to generate immediate gains.
Putting money in gold to mitigate currency risk
Gold enjoys an inverse association with the Pakistani rupee and that brands it an ideal investment holding for evading the risk linked with the currency marketplace. For example, you can protect your long position in PKR & USD by starting an additional long position in gold metal. Hence, when you see USD and PKR underperforming as per your hopes and depreciating, the long position in gold would balance any deficits you might suffer from.
Final Verdict
As we’ve seen in the previous years, there’s a chance for both gold and PKR to move into an association together. Therefore, it is suggested to keep an eye on the macroeconomic factors, political situations, and the demand and supply of gold to forecast its price changes compared to relying only on currency movements.