Engaging in gold and precious metals investment has traditionally been regarded as an effective approach to protecting wealth and broadening investment portfolios. Given its well-established status as a secure asset during economic challenges, gold generally maintains its value. Furthermore, the 1 tola gold price in Pakistan tends to rise even in the face of catastrophic events such as wars or pandemics, which can disrupt the stock market.
Nonetheless, similar to any investment, there exist advantages and disadvantages to including gold within your portfolio, and it might not be suitable for all investors.
If you are an investor aiming to examine the varying patterns of the precious metal market, keep on reading as we will discuss the important factors manipulating the 1 tola gold price in Pakistan this week.
Last Week’s Gold Market Performance
The 1 tola gold price in Pakistan (24K) started the week at Rs 224000 and ended the week at Rs 232000.
1. U.S. Economic recovery will influence 1 tola gold price in Pakistan
The U.S. stock market was passing through a bull run as investors were eagerly waiting for the employment data related to inflation and job numbers during the current week.
The Dow Jones Industrial Average rose by 200 points, equivalent to 0.4% on Monday. Similarly, the S&P 500 increased by 0.9%, along with NASDAQ Composite saw a rise of 1.4%. These stock market gains depict that the U.S. economy is showing resilience even in a tough time which is good for the overall country.
However, at the Jackson Hole symposium last week, Federal Reserve Chair Jerome Powell was convinced that the U.S. should keep high-interest rates for a long period of time. Therefore, we can say that extra high-interest rates will be good for the precious metals market and will increase the 1 tola gold price in Pakistan.
2. Rupee Devaluation will fuel Gold Investment
The recent PKR devaluation has caused a rapid increase in inflation, reaching the highest levels in Pakistan’s history. This sharp inflation increase is impacting the daily lives of the general public, and it has made their lives quite difficult. Likewise, the negative effects of this situation are spreading throughout society, causing a range of complicated financial and social challenges.
Throughout global history, situations where trust in a currency diminishes have typically prompted notable reactions. Frequently, the initial response to such a lack of confidence has involved a shift towards assets with tangible value, particularly gold. This precious metal, known for its lasting inherent worth, has acted as a safe haven for individuals and entities aiming to protect their wealth during times of currency uncertainty. The appeal of gold stems from its enduring recognition as a reliable store of value, transcending the fluctuations that currencies might undergo. Experts also expect more PKR devaluation that will increase the 1 tola gold price in Pakistan.
3. Pakistan must increase interest rates to contain rising Inflation
A common Pakistani is facing difficulties in managing their expenses, given that inflation remains at approximately 29 percent. Cutting down on subsidies in order to secure funds from the IMF led to a record increase in fuel costs, while electricity prices kept rising despite a decrease in demand.
Demonstrations against rapidly increasing electricity costs persisted in Pakistan for the fourth consecutive day on Monday. Television broadcasts displayed angry citizens participating in rallies and setting fire to their electricity invoices.
Gold experts think that a high inflation rate will favor the market as we might see an increase in the 1 tola gold price in Pakistan.
4. IMF and Friendly Countries’ Package not Enough
The IMF package has brought some economic relief but still, it is not enough for long-term economic growth. Since it is just a US$3 billion Stand-By package with limited benefits. However, financial assistance provided by strategic partners such as Saudi Arabia, the United Arab Emirates, and China will play an important part in reviving the economy.
While these packages provide temporary fiscal relief, still Pakistan is facing more intricate economic and political hurdles. The country is dealing with a negative economic growth rate of -0.5 % along with an unemployment rate of 8 % and an inflation rate of 29.6 %. Moreover, the 22 % interest rate has badly affected the economic environment without achieving its anticipated goal of curbing inflation. Pakistan is also facing forex exchange challenges as the State Bank of Pakistan maintains a mere US$8.2 billion. Therefore, Pakistan requires more than US$25 billion to fulfill its debt obligations.
Pakistan’s fragility is worsened by political uncertainty and security issues. Experts believe that the new government will be exposed to these challenges as there is no short-term solution to these issues. Moreover, there are speculations that general elections might be postponed and that could further increase Pakistan’s political instability, projected to cost the economy up to 3 percent of GDP per year.
Lastly, political instability is also creating difficulties for the nation, particularly following the apprehension of ex-Prime Minister Imran Khan. This could potentially lead to his party members initiating public demonstrations in response, thereby intensifying the level of political unpredictability. and 1 tola gold price in Pakistan.
Incorporating gold into a portfolio offers a valuable avenue for diversification. Allocating around 10-15% of your portfolio to gold serves as an effective strategy for enhancing its stability amidst market volatility.
Accumulating a substantial amount of gold is achievable by making modest monthly investments. Capitalize on various investment alternatives to craft a personalized blend that suits your needs by getting maximum out of fluctuations in 1 tola gold price in Pakistan.