Gold and other precious metals have emerged as appealing alternatives for investors in the current year, driven by ongoing inflation, economic uncertainties, and recent job reports falling below expectations. Amid these conditions, precious metals serve as a robust option for diversifying investment portfolios and mitigating risks in Pakistan. Their value typically does not closely correlate with traditional assets such as stocks and bonds. Since, precious metals prices including 1 tola gold price in Pakistan has increased during periods of current economic instability.
While investing in gold and silver presents an attractive option, it may not suit every investor, and thorough research is advised before making any investment decisions.
If you are also a gold investor, then keep reading as we will examine the factors that 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. 215,100 and ended the week at Rs 215700.
1. Federal Reserve Is the Key
The gold prices experienced an increase, reaching nearly a seven-month peak due to a series of dovish signals from Federal Reserve officials, intensifying expectations of an early shift by the central bank. The yellow metal benefited from a decline in the dollar, dropping to nearly four-month lows, along with decreasing U.S. Treasury yields, where the 10-year rate reached a two-month low during Asian trade.
Market caution prevailed ahead of crucial economic data releases this week, including from the U.S. and China. This caution, coupled with concerns over a global economic slowdown fueled by weak readings from Japan and the eurozone, contributed to sustained safe-haven demand for gold.
The above mentioned economic factors could eventually put pressure on international gold prices and is likely to increase the 1 tola gold price in Pakistan too.
2. Pakistani Rupee Depreciation Good for 1 tola gold price in Pakistan
The Pakistani rupee has approximately 20% decreased in its value against the US dollar in the 2023, making it the worst-performing currency in Asia.
However, just a month ago, the situation was quite different. In a brief period, the rupee emerged as the top performer in global markets. The surge occurred in October when the currency strengthened by 8%, reaching 275 per dollar, following a record low in September. This rebound was attributed to the Pakistani government’s actions against illicit dollar transactions, leading to increased demand for the rupee after a raid by Pakistan’s Federal Investigation Agency.
Despite this temporary upswing in October, the overall economic challenges facing Pakistan prevented a sustained recovery. Presently, the rupee stands at 285 per dollar, and some analysts project a further decline to the range of 324-350.
Experts believe that this expected currency devaluation will increase the 1 tola gold price in Pakistan.
3. Improvement in Pakistan Economy
Pakistan Bureau of Statistics (PBS) has calculated that Pakistan’s gross domestic product (GDP) grew by 2.13% during the first quarter of the current financial year 2023-24, showing a considerable improvement from the 0.96% growth recorded in the corresponding period of the last year. The agricultural sector was the main beneficiary as it showed 5.06% growth rate in the above mentioned period .Other than that the industrial sector grew by 2.48%, and the services sector by 0.82%.
The agriculture showed a significant 11.16% growth in the production of important crops. This growth is can be credited to an expanded sowing area, represented by a 21% increase for rice, 11% for cotton, and 5% for maize. However, there was an 11% decrease in the sowing area for sugarcane, which was compensated by the growth in the other three major crops.
However, economic experts still believe that this is a temporary improvement as Pakistani economy is shaking on the edge of a default, mainly due to the worst financial mismanagement and political uncertainty. Lately, the International Monetary Fund (IMF) has approved a loan tranche of $700 million to avert this default temporarily . Still, the economy faces colossal challenges of debt burdens, a shrinking economy, and dwindling foreign reserves. Therefore,it is the best time for bullion investors to take advantage of the current situation and invest in gold. Since,it is the time when safe haven demand of the precious metals will increase 1 tola gold price in Pakistan.
4. High Inflation Period
For the second consecutive week, official data reported that the short-term inflation rate in Pakistan has remained above 40 %. The significant surge in gas prices primarily contributed to this increase, according to information published on Friday in the English-language newspaper Dawn. The Pakistan Bureau of Statistics (PBS) disclosed that the inflation reading was 41.13 % for the week ending November 23,2023. Gas prices were highlighted as a major factor.
Experts believe that 1 tola gold price in Pakistan could increase in next few weeks due to high inflation in the country.
Including a small portion of precious metals in the investment portfolio helps in diversification and also acts as a hedge against inflation. However, sometimes experts suggest to keep a minimum 10 % share of gold in the overall investment portfolio. As, they think that precious metals are occasional volatile and underperform in the long term compared to equities.
In the current uncertain economic environment, exploring alternative assets like precious metals may be a prudent consideration. However, it is advisable to seek guidance from your financial advisor or accountant to ensure that your gold investments align with your overarching long-term goals. The precious metals can be good option in Pakistan as 1 tola gold price in Pakistan has seen a significant increase, rising from 129,000 to well over 200,000 Pakistani Rupees per tola since March 2022.