Gold and silver prices in Pakistan have witnessed a significant increase, following global trends and a weakened rupee, on the eve of a monetary policy meeting. The price of gold (24 carats) rose by Rs1,200 per tola and Rs1,028 per 10 grams, settling at Rs209,500 and Rs164,645 respectively, according to data released by All-Pakistan Sarafa Gems and Jewellers Association (APSGJA).
The depreciation of the rupee against the dollar in the interbank market, with a loss of Rs1.25, is seen as a contributing factor to the increase in gold prices. The State Bank of Pakistan is expected to raise the policy rate by 100-200 basis points as inflation continues to spiral out of control. Consumer price inflation in Pakistan reached a record high of 35.37% in March compared to the previous year, with rising consumer prices straining budgets and causing financial difficulties for many households.
Gold is often considered a hedge against inflation, as it tends to increase in value when the purchasing power of the dollar declines. With Pakistan’s monthly inflation exceeding forecasts and reaching nearly an all-time high level of 35.4% from a year earlier, the demand for gold as a safe-haven asset has surged.
The increase in gold prices is also influenced by global factors. World gold prices rebounded as the dollar trimmed its initial gains driven by expectations of OPEC’s surprise output cuts leading to higher global energy prices and potential interest rate hikes by central banks. Spot gold rose by 0.5% to $1,977.43 per ounce, while U.S. gold futures gained 0.4% to $1,994.50. However, gold prices had touched a one-week low of $1,949.54 earlier in the session.
While gold is traditionally considered a safe-haven asset during times of inflation, the potential for interest rate hikes to curb rising price pressures can dampen its appeal since it does not pay any interest. Nevertheless, the surge in gold prices in Pakistan is driven by rising inflation and the weakened rupee, prompting traders to exercise caution.
In addition to gold, silver prices in Pakistan have also reached all-time highs, with an increase of Rs80 per tola and Rs68.59 per 10 grams. Silver prices in the international market fell by 0.3% to $24.01 per ounce, while platinum was down 0.3% to $988.60 and palladium rose by 0.7% to $1,470.72.
In conclusion, the recent surge in gold and silver prices in Pakistan is attributed to various factors, including global trends, a weakened rupee, and soaring inflation. As the State Bank of Pakistan is expected to raise the policy rate to tackle inflation, and with gold traditionally considered a hedge against inflation, the demand for gold and silver as safe-haven assets may continue to rise in the country. However, potential interest rate hikes and other global factors may impact the trend of gold and silver prices in the future, and investors and traders need to closely monitor market dynamics.