The price of one-tola gold in Pakistan hit yet another all-time high on Tuesday to Rs273,000, breaking the previous record of Rs272,500 mere days ago.
The yellow metal has been on an unprecedented upward trajectory in recent weeks, with the price registering a growth of over 7% since August 1, 2024 in the local market.
What is the reason behind the rally?
Pakistan is an importer of gold so its price is dependent on two factors – the international rate and the value of the dollar.
With the rupee-dollar exchange rate stable, the rally has mainly come on the back of its international rate.
“The increased volatility on the geopolitical front, especially escalating tensions between Israel and Lebanon have raised demand for the safe-haven commodity,” Muhammad Adnan Qadri, Convener FPCCI Central Standing Committee on Gems & Jewellery, told Business Recorder.
The war-weary region of the Middle East remains a point of global concern. On Tuesday, Israel struck what it claimed were Hezbollah targets in southern Lebanon and its Iran-backed foe attacked military facilities in northern Israel, increasing fears of a full-blown conflict.
This comes alongside an almost year-long war in Gaza where Israeli aggression has killed over 40,000 people including women and children. It says it was trigged into this war after the October 7 attacks by Hamas.
But beyond geopolitical tensions, some recent economic decisions have also played a role in gold’s surge.
The “larger than expected” rate cut by the US Federal Reserve last week also led to a surge in demand for gold in the international market, Qadri said.
The Federal Reserve cut interest rates by half a percentage point last week, kicking off what is expected to be a steady easing of monetary policy with a larger-than-usual reduction in borrowing costs that followed growing unease about the health of the job market.
Experts said that industrial demand for gold has also risen significantly, and the metal is being heavily used in electric vehicles, robotics, AI and nuclear energy.
Meanwhile, the market is also seeing heavy buying from China and India, influencing the international rate as well, they said.
“From mid-September till October, China and India are expected to be involved in massive buying of gold,” said Abdullah, a gold trader.
However, locally, the commodity remains out of reach for many.
“Customers are resorting to silver and imitation jewellery, amid limited purchasing power,” said Abdullah, referring to record inflation in Pakistan that has eroded the citizens’ ability to spend on commodities like gold.
Looking ahead, experts anticipated gold rates to remain elevated in the coming months.
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