Gold has a tendency to maintain its value consistently over the long term, exhibiting less volatility compared to other investment types. This stability is attributed to its intrinsic limited supply and the impossibility of being printed or replicated, a characteristic not shared by other securities.As a result, gold has traditionally been regarded as a safe haven by Pakistani investors. In times when the value of other assets is decreasing, gold generally remains stable or may even appreciate. This quality makes it a valuable asset for local investors seeking to protect their wealth, especially during challenging economic recessions.
If you are gold investor, then keep reading as we will also analyze factors that could impact 1 tola gold price in Pakistan.
Last Week Gold Market Performance
The 1 tola gold price in Pakistan (24K) started the week at Rs. 218,200 and ended the week at Rs 219300.
1. Federal Reserve Will Play Its Role
Gold is still holding its position above $ 2000/ounce mark, recovering from a previous session decline. Investors are keenly anticipating the minutes from the latest Federal Reserve meeting to get awareness about future monetary policy directions.
The precious metal experienced a 0.2 % decrease yesterday due to dollar resurgence and Treasury yields. Market participants adjusted their outlooks regarding potential interest rate cuts by major central banks for the remaining year.
Currently, there is a 70 % chance of a quarter-point cut by the Federal Reserve in March, a decrease from the previous 90 % probability.
Despite a favorable environment created by the decline in real bond yields in recent months, gold continues to be significantly above levels associated with current real yields in fundamental terms. The overall outlook suggests a strong inclination toward further declines in gold prices in the upcoming months, with the chart pattern displaying a distinctly bearish trend after its inability to maintain levels beyond $2,000.
Moreover, an increased desire for safe-haven assets, especially in light of indications pointing to a potential escalation in the Israel-Hamas conflict, could contribute to a rise in the value of gold as a secure investment.
The above mentioned economic environment will stabilize the gold prices in USA and could eventually increase the 1 tola gold price in Pakistan too. Therefore, it is best time for investors to put their money in bullion market.
2. PKR Appreciation will Affect Investors in the Gold Market
The Pakistani rupee showed consecutive improvements against the US dollar, increasing by 0.02% in the inter-bank market on Thursday. According to the State Bank of Pakistan (SBP), the rupee concluded at 281.67, marking a rise of Re0.05.
In the preceding session on Wednesday, the rupee had experienced a slight gain, settling at 281.72 in comparison to the US dollar.
In a significant development, reports suggest that the interim government has formulated a proposal to reduce industrial tariffs by up to 25%. However, this initiative requires approval from the International Monetary Fund (IMF), which was previously denied for the winter package, as per well-informed sources cited by Business Recorder.
Experts believe that this estimated currency appreciation will increase the 1 tola gold price in Pakistan.
3. High Policy Rate will affect 1 Gold Price in Pakistan
The Pakistani economy is showing some signs of improvement but the existing economic model in Pakistan is deemed ineffective, as it lags behind neighboring nations. The start of the year offered minimal relief to the public, with the ongoing cost of living crisis extending from 2022. Inflation hovered around 30% consistently throughout the year, driven by a combination of elevated commodity prices, depreciation of the rupee, and a notable adjustment in economic fundamentals. Despite considering the high base effect from the preceding year, prices in 2023 remained elevated.
Contributing to the financial dilemma was the burden of debt servicing. Government borrowing has surpassed the Rs 60 trillion threshold, with about two-thirds of it stemming from domestic lending.
The persistent high policy rate has somewhat constrained the growth of the money supply. However, this has come at the expense of the private sector, which has experienced a near-severance from the credit market. Consequently, the large-scale manufacturing industry has endured challenges throughout the year, as escalating financing costs, measures to curb demand, and the displacement of private credit have impeded the continuity and expansion of business operations.
Therefore analysts believe that, it is the best time for gold investors to take advantage of the present environment and invest in gold. Since, it is the time when safe haven demand and value of the precious metals will increase 1 tola gold price in Pakistan.
4. High Inflation Will Increase Gold Value
According to a report from Insight Securities, the inflation trend in the second quarter of fiscal year 2024 has exceeded the predictions. Inflation remained high contrary to expectations of a decrease in the Consumer Price Index (CPI). This is attributed to the adjustments in gas tariffs in November 2023 and a higher Foreign Currency Account (FCA) in December 2023, which deviated from the earlier forecasts.
In reaction to the economic crisis, the State Bank of Pakistan (SBP) implemented emergency measures, raising the policy rate by 6% throughout 2023. Although plans for an inflation targeting regime were already underway. The unexpected peak inflation in March, attributed to a sharp decline in the rupee value, prompted the central bank to announce a significant increase of 300 basis points in a single meeting.
According to data compiled by Bloomberg, Pakistan, which has raised rates by a cumulative 600 basis points since January, now ranks fourth on the list of the world’s 50 central banks that have made the most substantial rate changes this year.
Experts believe that 1 tola gold price in Pakistan could increase in next few weeks due to high inflation in the country.
While there may be varying opinions among experts regarding the optimal use of gold, a consistent piece of advice emerges: Irrespective of the economic conditions, incorporating gold into your investment portfolio can contribute stability. Naturally, like any asset, it is essential to grasp both the advantages and disadvantages of gold before deciding to invest in it. Therefre,it is extremely important for investors to take advice from a registered brokerage house in Pakistan .The expert hired by these companies will offer you thoughtful and well-informed suggestions for your long-term investment strategy
Considering the rise in the price and value of 1 tola gold price in Pakistan from 129,000 to well above 200,000 Pakistani Rupees, opting for investments in precious metals appears to be a viable option.