Gold is one of the most popular investment options for the Pakistani investors as they believe it to be the only safe haven option during economic recessions. Moreover, they consider it quite profitable due to consistent appreciation in its value due to rise in 1 tola gold price in Pakistan.

However, experts believe that besides earning profits from this precious metal, they must also keep an eye on factors affecting 1 tola gold price in Pakistan before making a final decision. If you are an investor and looking to know reasons for fluctuations in 1 tola gold in PKR, then keep reading as  we explore the various elements that will affect the 1 tola gold price in Pakistan this week.

Last Week Gold Market Performance

The 1 tola gold price in Pakistan (24K) started the week at Rs 206000 and concluded the week at Rs 205000.

1.   U.S Economy  will influence 1 tola gold price in Pakistan

Gold might experience significant increases following the release of data showing lower-than-anticipated growth in U.S. retail sales during June. This indicated the possibility of less persistent consumer inflation.

However, the strength of the dollar, which had a sharp recovery from 15-month lows, will prevent gold prices from making more substantial gains. There’s an expectation of heightened demand for the greenback ahead of an upcoming Federal Reserve meeting.

Additionally, the appeal of gold was bolstered by dovish signals from the European Central Bank and the Bank of England. Furthermore, increased demand for the precious metal as a safe-haven asset was driven by concerns over worsening economic growth in China. All these factors will surely increase the 1 tola gold price in Pakistan in upcoming days.

2.   Rise in the USD/PKR exchange rate 

On Tuesday, the Pakistani currency experienced a 1.34% decline, equivalent to Rs3.78, reaching its lowest value in three weeks at Rs283.04 against the US dollar in the inter-bank market. This marks the third consecutive day of losses, primarily due to the increased demand for the US dollar.

The rupee’s drop can be attributed to speculations that the black market is gaining strength again, where Hawala and Hundi operators are offering significantly higher prices for the US dollar compared to the rates prevailing in the inter-bank and open markets.

In the open market, the rupee depreciated by 1.37%, or Rs4, settling at Rs290/$. Consequently, the difference between the exchange rates in the two markets widened to Rs7, exceeding the acceptable level of Rs4. Market experts believe that this US dollar appreciation will surely increase 1 tola gold price in Pakistan in near future.

3.   Low Inflation will influence 1 tola Gold Price in Pakistan

Pakistan has successfully curbed the high inflation but still it is quite high. Since April 2022, the State Bank of Pakistan (SBP) has increased its primary policy rate by 12.25 percentage points primarily to control the surging inflation. Federal reserve will organize upcoming monetary policy meeting on July 31,2023.According to the staff report, the meeting aim is to bring the forward-looking real policy rate back into positive levels in the short term. This measure is intended to re-establish confidence in the future economic direction and ultimately attain the SBP’s inflation target over the medium term.

Pakistani analysts believe that current high inflation will influence investors and speculators to invest in the bullion market and that will rise the 1 tola gold prices in Pakistan.

4. Pakistani Economic Stability after IMF Agreement 

The IMF board has approved $3 billion bailout package for Pakistan last week. The main objective of this plan is to stabilize the Pakistani economy through a quick distribution of approximately $1.2 billion.

International monetary fund and PML-N led government has carried out an agreement last month at the staff level. This fund distribution was extremely crucial as it will help Pakistan to resolve its concerns such as immediate default.

However, this agreement with the international lender also comes with stringent conditions concerning expenditure and the implementation of structural reforms. These kinds of terms will surely create extra economic hardships on many common citizens.

Country’s economic performance has been miserable since the ouster of  Imran khan in April,2022 through a vote of no confidence .Political uncertainty and high inflation has made PML-N led alliance quite unpopular among general public. As per latest Gallup survey, 62 % general population is against PDM alliance for its economic mess. Economic and political uncertainty will certainly increase the 1 tola gold price in Pakistan.

What to do?

Gold has reached its all-time high 1 gold price in Pakistan and  investors are seeking refuge in the precious metal due to the uncertain macroeconomic conditions. Analysts are optimistic about its prospects, considering the possibility of a forthcoming recession, which could drive gold’s value even higher.

1 gold price in Pakistan has risen over 10% this year, setting a trajectory for their strongest yearly performance in three years, reaching approximately Rs 205000 per tola. This falls just short of their previous peak, during a time of heightened geopolitical uncertainty and widespread interest in the safe-haven options in May 2023. Therefore, it is a good time to invest in the bullion market.