Gold is recognized as a savvy safeguard against inflation, enabling the preservation of wealth even as fiat currency diminishes in purchasing power. Its scarcity prevents devaluation through oversupply, in contrast to the vulnerability of currencies like the dollar that can be devalued by an excess in circulation. Moreover, gold has a proven history of maintaining its value, acting as a secure refuge and a possible defense against inflation during periods of economic uncertainty.
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. 217,200 and ended the week at Rs 219800.
1. Israel-Hamas War Will Play Its Role
Gold prices in Asian market this week remained within a narrow range following a significant surge in December, driven by optimism about early interest rate cuts by the Federal Reserve. The yellow metal value surpassed key levels in recent sessions and was currently trading just under $100 below the record high set at the beginning of the month. The Fed’s indication that it was halting interest rate hikes and planning rate reductions in 2024 triggered the recent rally in gold prices.
Market expectations of a potential Fed interest rate cut as early as March 2024, coupled with data showing a sustained cooling in U.S. inflation, contributed to the stability of spot gold at $2,064.84 per ounce. Gold futures expiring in February rose 0.3% to $2,075.85 per ounce by 01:14 ET.
The gains in December positioned gold prices for a 12% to 14% increase in 2023. However, compared to other risky investment options, particularly shares, gold still trailed behind due to comparatively high U.S. interest rates. The S&P 500, for example, was likely to register approximately a 24% increase in 2023.
Gold value will benefit
Gold value is anticipated to benefit further due to U.S. interest rates decrease and expected global economic conditions deterioration next year. While the U.S. economy has manifested a resilience as compared to other economies that are grappling with a continuous growth slowdown.
Market expectations suggest that the Fed might trim interest rates between three to five times in 2024, with the possibility of the first rate cut occurring as early as March 2024. High interest rates have previously limited significant gains in gold throughout much of 2023.
Additionally, heightened safe-haven demand, particularly amid signs of a potential escalation in the Israel-Hamas war, could contribute to increased value of gold as a safe-haven asset.
The above mentioned economic environment will stabilize the gold prices in USA and could eventually increase the 1 tola gold price in Pakistan too.
2. PKR Appreciation will Affect 1 tola gold price in Pakistan
The Pakistani rupee continued its meek appreciation as compared to the US dollar, and showed gains of 73 paisas in the interbank market and 50 paisas in the open market for the sixth consecutive week.
In the current fiscal year 2023-24, the rupee has exhibited an overall improvement of Rs5.76. However, during the entirety of the present year, there was a depreciation of Rs51.69. Notably, in November, the rupee lost Rs3.69 against the US dollar, following a gain of Rs6.26 (2.23 %) in October. In September, the currency had surged by more than 6 percent, making it the top-performing currency globally during that month.
Experts believe that this estimated currency appreciation will increase the 1 tola gold price in Pakistan.
3. Pakistan still Facing Recession
The Pakistani economy is showing some signs of improvement but the existing economic model in Pakistan is ineffective, as it lags behind neighboring nations. Especially, developments in reduction of poverty are regressing, and the benefits of economic prosperity are disproportionately benefiting a select elite, as per observations by the World Bank Country Director Najy Benhassiner. It is vital to improve the general business environment, mainly for smaller enterprises, by decreasing administrative hurdles and reducing discretionary practices in government-business interactions. Properly addressing consistent structural macroeconomic disparities, particularly on the fiscal front, is critical to establish a more steady economic climate and appeal investor confidence.
Economic experts believe that restructurings in the energy sector must aim to build up advancements toward financial stability, improve the administrative efficiency of distribution companies by boosting greater private involvement, and tackling the unreasonably high costs connected with electricity generation by encouraging an increased usage of renewable energy sources.
The current economic environment manifests that Pakistan is still going through a recessionary period and it needs radical reforms. 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
The Finance Division of Pakistan stated in its monthly economic outlook report on Wednesday that inflation is anticipated to decrease to the range of 24-25 % in January 2024. The projected improvement is attributed to a stable exchange rate and an improved supply position, according to the report.
Experts believe that 1 tola gold price in Pakistan could increase in next few weeks due to high inflation in the country.
Ultimately, gold serves as a liquid investment. It maintains a constant demand, allowing you the flexibility to buy or sell it whenever necessary. This liquidity can be beneficial in scenarios of unforeseen expenses, job loss, or challenging financial circumstances. Additionally, it can function as a valuable financial safety net during periods of economic uncertainty.
Considering the rise in the price and value of 1 tola of gold in Pakistan from 129,000 to well above 200,000 Pakistani Rupees, opting for investments in precious metals appears to be a viable option.