Gold possesses unique characteristics that make it stand out as a rare, easily tradable, and independent asset, making it an effective diversifier in the long run. As both an investment and a luxury product, gold has delivered consistent yearly returns of approximately 8% since 1971, making it comparable to equities and even surpassing bonds and commodities. Therefore, right now it is most favorable investment option for Pakistani investors. And they know that it is the right time to take advantage of fluctuations in the 1 tola gold price in Pakistan/.

Furthermore, the traditional role of gold as a safe-haven asset ensures its reliability during periods of heightened risk. However, its dual appeal as an investment and a consumer good allows it to yield positive returns even in favorable economic conditions. This ongoing dynamic is likely to persist due to enduring political and economic uncertainties and concerns surrounding equity and bond markets.

If you are an investor and want to know the reasons behind the rising bullion market, then keep reading as we analyze the various factors affecting 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 218000 and ended the week at Rs 222000.

1.   U.S Economic Performance will influence 1 tola gold price in Pakistan

Gold is currently trading at $ 1,960/ounce, showing a recovery from its old rate of $ 1,940/ounce in the last week.

The international gold prices was influenced by strong initial U.S GDP data for the second quarter, which shown a growth rate of 2.4%, exceeding experts’ expectations of 1.8%. This improved  the US dollar value, leading to its strengthening against major currencies and causing gold to retreat from its daily highs near 1,980 to the range of 1,940.

Despite the appreciation of the US dollar, gold remains in demand as a safe-haven asset due to ongoing geopolitical instability. Upcoming data on the US labor market (Nonfarm Payrolls, Unemployment Rate) set to be released on Friday might influence gold prices further. However, uncertainties lingered about the precious metal’s ability to reach record highs, mainly due to the expectation of the U.S. rates remaining elevated for a longer duration. These factors might also influence 1 tola gold price in Pakistan.

2.   Further Devaluation of the Pakistan Rupee

The Pakistani rupee continued its decline against the US dollar, losing further value in the interbank market on last Tuesday. According to data from the State Bank of Pakistan, the local currency experienced losses against the greenback, falling by Rs0.90.

Simultaneously, the dollar experienced a drop of Rs1 in the open market and was traded at Rs290.Earlier this week, the rupee remained under pressure against the US dollar and faced minor losses. The central bank of the country recently extended the settlement period for card-based cross-border transactions through interbank for an additional five months.

Financial experts believe that the decline in the local currency is a knee-jerk reaction resulting from the government’s removal of several import restrictions as demanded by the IMF. This decision has put pressure on the rupee, and experts believe rupee will gradually depreciate as the backlog created due to import curbs has now been cleared. Current analysts believe that this US dollar value appreciation would certainly raise 1 tola gold price in Pakistan in the near future.

3.   Pakistan has to contain Inflation

Pakistan has faced a high inflation in the July 2023 ultimately reaching 28.3 %,which is 0. 3 % decrease compared to preceding month and an increase of 4.3 % compared to July 2022.Analyzing the inflation trends specifically in urban areas. The urban inflation rose by 3.6 % in July 2023, as compared to a 0.1 % increase in the previous month

According to Pakistani analysts, the prevailing high inflation would drive investors and speculators towards the bullion market, leading to an increase in the 1 tola gold price in Pakistan.

4. Immense Challenges for Pakistani Economy

Pakistan is encountering considerable economic challenges and problems due to political uncertainty and postponements in the International Monetary Fund’s (IMF) bailout package. The National Economic Council just sanctioned the annual plan (2023-24), along with ambitious GDP growth targets of 3.5 % and inflation at 21 % for the upcoming year. But, attaining these targets appears to be quite tough for the economy that only grew by just 0.29 % in the current year.

In addition to that, Pakistan is also facing serious issues like currency devaluation, high inflation, political uncertainty, a small pool of qualified human resources, and a lack of reliable economic policies. The government is striving to secure a Stand-By Arrangement (SBA) with the IMF to navigate the economic challenges amid political instability following the removal of former Prime Minister Imran Khan.Experts believe that, the current financial and political uncertainty will play an important role in the rise of the 1 tola gold price in Pakistan.

Final Words

Gold investing presents lots of benefits for an average investor in Pakistan. It serves as a safeguard against inflation, provides diversification advantages, and represents a tangible asset with intrinsic worth. It is a preferable investment option for investors as it is easily tradable having potential for long-term growth in the near future. However, it is important to carefully analyze market conditions, detailed research reports by experts, and assess personal investment objectives before making any investment decision.

Gold proves to be highly advantageous for long-term investors due to its consistent upward trajectory in price, as evidenced by the perpetual increase in 1 tola gold price in Pakistan. While precious metals may encounter temporary fluctuations, historical data indicates a steady upward trend over extended periods, which can potentially result in significant returns for patient investors. However, those seeking quick profits should be aware that gold may not align with their investment strategy.