Gold climbs to new peak in Pakistan

Gold has been on a rising spree for the last several weeks and kept hitting an all-time high. In line with the dominant trend, the price of gold climbed to a new peak of Rs182,700 per tola (11.66 gram) on Tuesday, after a jump of Rs4,500.

Meanwhile, the 10-gram gold price also increased by Rs3,858 to Rs156,636. In the international market, gold rates increased by $12 to $1,810 per ounce.

The price has jumped by 13.3% (or Rs21,500) per tola since December 1, 2022. The explosive growth raised questions as to whether the surging price is sustainable or constitutes an unsustainable bubble.

The All-Pakistan Sarafa Gems and Jewellers Association (APSGJA) reported that the price of gold has been “over cost” by Rs5,000 per tola in Pakistan, as compared to prices in Dubai. This means that, at present, the Pakistani gold market is more expensive than the world market.

The shift from "under cost" to "overcost" also raises questions about the sustainability of the bullion price in Pakistan.

To recall, demand for gold hit a record high at 13 tonnes (worth around $800 million) in July-September 2022, rising by 34% quarter-on-quarter, in the three months after the US dollar, and other leading foreign currencies went out of stock from the legal markets.

Fresh reports suggest that gold has gone out of stock in Pakistan as well.

Earlier, the US dollar was the most preferred asset for investment in Pakistan. During high inflation days, investors parked their savings in foreign currency to safeguard their funds from the devaluing rupee.

The difference between gold’s official price and the price at which it is being sold is widening. The association has announced the official price at Rs182,700 per tola in the Sarafa market. It is, however, being sold at around Rs185,000 per tola.

Earlier, association member, Abdullah Abdul Razak Chand said in recent times, about 90-95% demand for gold is coming from the investors’ community instead of genuine buyers.

Financial pundits and goldsmiths anticipate that the price of gold may rise to Rs200,000 per tola due to the rupee devaluation against the US dollar under the current cycle.

However, they also believe that an inflow of $6-8 billion from multilateral and bilateral creditors will burst the pricing bubble in Pakistan.

Silver rates increased by Rs30 to Rs2,050 per tola to a new all-time high price in the country. The price of 10-gram silver also rose by Rs25.72 to Rs1,757.54.

Earlier, Muhammad Shafi Khan, a senior goldsmith, told The News that local people were investing in raw gold, as the rupee remained unstable. However, jewellery was not in higher sales and workers were losing jobs in the gold market.

He said that high-level income families were buying gold on marriages and other occasions while the majority of people have moved towards artificial jewellery.

Shafi Khan said that with sales of jewellery at least five other stakeholders used to get livelihood including workers, but now all benefits have been wiped off as investors have moved to raw gold only. “Investors are buying raw gold bars only,” he said.