The price of gold in Pakistan marked a week of record increase. According to data issued by the Karachi Sarafa Association, the price of 24-carat gold gained Rs 1,700 to Rs 263,700, while the price of 10 grams rose by Rs. 686 to Rs. 2,24,451. The 10-gram gold was sold at Rs226,080 after it registered an increase of Rs 1,457.
Meanwhile, the international rate of gold increased on Saturday. As per All-Pakistan Gems and Jewellers Sarafa Association (APGJSA), the rate was at $2,512 per ounce (with a premium of $20), an increase of $20 during the day.
The precious metal surged by Rs. 700 per dollar on Tuesday, reaching a new high of Rs. 260,700, while gold gained Rs. 300 per dollar yesterday, reaching a record high of Rs. 2,61,000. Despite the price increase, the Sarafa Association asserted that gold in the local market is still priced at Rs. 3,000 per dollar, lower than its value. In the international market, spot gold fell 0.2 percent to $2,507.32 per ounce as of 1.02 GMT, after reaching a new high of $2,531.60 on Tuesday. However, US gold futures were down 0.2 percent at $2,543.40.
The record increase in gold prices in Pakistan has various impacts on various sectors like social and economic sectors. Â
- Firstly, the increased price of gold is anticipated to contribute to the all-inclusive inflation economy, as gold is considered to be the more expensive metal. If the cost of it increases, then it leads to higher costs in other gold-related sectors.
- Secondly, the increase in gold costs often depicts a weakening of the local currency, in this case, the Pakistani Rupees, against the dollar rate. This depreciation or devaluation of Pakistani Rupees is anticipated to make imports more expensive, further exacerbating the trade deficit.Â
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- Thirdly, in Pakistan, gold is considered to be a massive part of cultural practices, especially at weddings. The increased cost of gold can pose various threats and can create issues for families to afford the gold metal jewelry, which is very necessary for these events, potentially leading to a financial crisis.
- Fourthly, high gold prices are anticipated to encourage more investment in gold as a haven, specifically in a volatile economic environment. This is anticipated to divert funds from other investment opportunities, like stocks or bonds, further affecting economic growth.
- Fifthly, as gold prices increase, consumers may change their purchasing habits, choosing lower-grade gold or substitute materials, which is anticipated to impact the industry and artisans, who solely depend on conventional gold craftsmanship.
- Sixthly, the decision of the Sarafa Association to keep the local gold costs below the actual market value by Rupees 3000 per tola, highlights an effort to stabilize the market. However, this would create a discrepancy between the unofficial and official markets, which is anticipated to create potential issues with black market trading.
- Furthermore, the decrease in spot gold prices internationally, despite its high records, indicates fluctuating demand. Global factors like geopolitical tensions, interest rates, and economic policies of various economies, like the United States, significantly affect gold prices. The decline in United States gold futures also depicts the market expectations and investors’ sentiment.
- Additionally, the government might consider adjusting tariffs on gold imports to manage the price increase and specifically the impact on the economy. High tariffs are anticipated to reduce imports, but this could also lead to increased smuggling rates.