4 factors affecting 1 tola gold price in Pakistan

Investing in gold in Pakistan can be done through several methods such as purchasing physical gold, investing in gold exchange-traded funds (ETFs), or investing in gold mining companies. But before making an investment in gold, you must know about factors affecting 1 tola gold price in Pakistan.

There are a number of things that affect bullion prices. Therefore, it is quite important to do your homework and know the market environment before making any investment decisions. Therefore, let’s analyze the current market and the factors affecting it this week.

Gold Market Performance last week

The 1 tola gold price in Pakistan (24K) started the week at Rs 215900 and ended the week at Rs 236000.

Global demand and supply

The beginning of the week saw a positive trend in international gold prices after three consecutive days of losses, as the rally of the US dollar took a pause. With no significant economic data available, a technical correction and reduced market anxiety have halted the decline in gold prices. Spot gold XAU/USD is currently traded at $2,015 per ounce, which is 0.30% higher than its initial price.

Despite concerns over the United States debt ceiling negotiations and the banking sector last week, which led to a strong rally in the US dollar, the price of gold remained under pressure. Looking ahead, investors will continue to closely monitor discussions on the debt ceiling, concerns regarding the banking sector, Federal Reserve expectations, and economic data to determine the future direction of gold prices. Experts in Pakistan anticipate that the weak international economic outlook will result in higher bullion prices, which will also impact the 1 tola gold price in Pakistan.

USD to PKR exchange rate

The Pakistani rupee is depicting some kind of stability due to the hopefulness surrounding the revival of the IMF loan package. The PKR started the week at Rs 283.00 and ended the week at Rs 295.

However, currency dealers are not much hopeful about the Pakistani rupee as political uncertainty due to delays in provincial elections and the possible arrest of PTI chairman can damage the Pakistani currency market. But, it is encouraging news for bullion investors as 1 tola gold price in Pakistan would rise with the falling rupee value.

Inflation

Escalating inflation poses a significant worry for both consumers and the economy, as it leads to a surge in the cost of living, making it harder for individuals to afford essential goods. Additionally, it can diminish purchasing power, which has a broad impact on the overall economy.

Based on official data, the Sensitive Price Indicator (SPI) indicates that weekly inflation in Pakistan has increased by 0.27%, reaching 48.02% on a year-on-year basis for the week ending on May 11. The short-term inflation rate had already reached a record high of 48.35% for the period ending on May 4.

Among the 51 monitored items, 23 experienced an increase in average prices, 7 decreased, and 21 remained unchanged during the week. Notably, potatoes witnessed the highest price surge of 112.80%, followed by gas charges for Q1 at 108.38%, Lipton tea at 106.09%, wheat flour at 101.20%, and gents sponge chappal at 100.33%.

Consequently, when inflation occurs, Pakistani investors frequently turn to gold as a means to preserve their wealth and as a store of value. This heightened demand for gold is likely to drive up the 1 tola gold price in Pakistan as more individuals would be inclined to purchase it.

Political and economic Uncertainty

Pakistan, a South Asian country with a population of 220 million, has experienced a stagnation in economic growth accompanied by a significant rise in inflation. The depreciation of the Pakistani rupee and a decline in foreign currency reserves have made it difficult for the country to import essential goods, including food, resulting in tragic stampedes at distribution centres. Concerns about the possibility of Pakistan defaulting on its debt have been present for several months.

On the other hand, political uncertainty is at its peak as PML-N and its allies have decided to pressurize the apex court through protests and criticism.   Moreover, they have committed a severe constitutional violation by not holding provincial assemblies’ elections within 90 days. Therefore, all eyes are on SC as it is not still clear how it will deal with this violation. Furthermore, the PML-N-led government is preparing to arrest Imran Khan which can increase political uncertainty in the country. Here, the federal government should show some maturity and look for some political solution and save the country from moving towards anarchy.

What to do?

While the bullion market is commonly regarded as a secure investment option, the price of 1 tola gold price in Pakistan can be unstable and influenced by changes in the market. Hence, it is crucial to seek guidance from a financial advisor or investment expert prior to engaging in gold market activities.