Who isn’t a fan of the gleaming yellow dense metal? Gold has dedicated buyers not only in Pakistan but all over the world. It is popular to purchase as it carries many benefits. Gold in Pakistan is often used in different kinds of jewelry and as well as in the form of investments. People in Pakistan, frequently give gold jewelry as gifts during the wedding season. Not only because the ornaments look beautiful but also because many consider it to be a good investment. Apart from citizens, investors also prefer to buy Gold as it gives greater returns compared to stocks and bonds. It also presents investors with a stable position in the financial market when a country’s economy is weak or unstable. Currently, the gold price in Pakistan has increased dramatically. Factors affecting gold prices include inflation, oil prices, exchange rate, and political risk.
It is no secret, that the value of the Pakistani Rupee has been deteriorating in the FOREX, which is hurting the country’s economy. With inflation in the country rising with every passing week, disasters such as flash floods have encouraged the rise in the Gold price. As for gold price, today is recorded at 139,500 for 24K and 127,865 for 22k. The surge is quite inviting and promising to the business magnates who are willing to put in their money as it serves as an inflation hedge and they believe it to be their safe haven as paper money values drop drastically while going through a recession and other factors. The citizens intend to wait for the prices to be on the lower side before making a purchase since due to inflation, they have weaker buying power.
Although, some of the financiers may also halt the buying process if there is too much fluctuation in the Gold rate in Pakistan. Many also argue that according to the current situation of the financial market, cryptocurrencies such as Bitcoin act as a better inflation hedge compared to Gold. The following are five important factors that affect the gold rate today.
- Supply Factors
- Central Banks
- Interest Rates
- Rise in the US dollar
As mentioned earlier, the inflationary period is the time when investors rush to buy gold as the paper money’s value deteriorates. It is their safe haven and a beneficial investment plan for a steady future. However, at times Gold may not connect well with inflation. Although it is marked as a popular inflation hedge, there is always a chance it might not deliver high returns. With fluctuations recorded in events such as the Great Recession, it was noticed that the dense metal was capable of positive elasticity which means the gold price is raised higher when there is a demand in the marketplace.
Since the wedding season is right around the corner in Pakistan, it was quite predictable that gold prices in Pakistan would face a surge. Some experts believe focusing and analyzing inflation proportion solely is not enough while thinking to invest in Gold. For better outcomes, one should also study the whole economic picture and then make a reliable choice. These days’ investors are leaning towards investing in crypto, as the financial market shows slightly unsteadiness in gold prices today.
Gold mining is a difficult task and that is one of the core reasons behind the abnormal rise in the gold rate today. Although Gold mines such as Reko Diq located in Baluchistan mine in huge and copious quantities, but are left with a minimum quantity of the actual metal once billions of tons of useless ground rocks are removed. When there is a rise in demand, the supply needs to be processed faster and with more labor, it requires more input of money for the mining to take place to meet the overwhelming surge by the marketplace. This leads to gold prices in Pakistan climbing higher, making it difficult for the ones with lower purchasing power to own it, regardless of how beneficial it is as a defense guard against inflation and currency devaluation.
Central bank reserve consists of gold to trade for financial purposes to deposit it to earn interest and to use it as a warranty for market loans. When the economy of a country is doing better and the Forex exchange reserve is good in quantity then the monetary bank tries to get rid of the Gold it has. Hence, there is a drop in the Gold price due to no threats such as inflation which results in investors showing no interest in buying the dense metal which makes it a dead asset for the bank.
Gold has a very circumstantial relationship with interest rates. Commonly, when Interest rates are raised in the market, the gold rate in Pakistan decreases as the financiers turn towards investing in reserves with less potential for risks, such as bonds. However, history has also suggested a positive relationship between the two, but in the era of the Great Recession, the gold rate went up very quickly as soon as the interest rates descended, since the investors predicted there might be an epic economic fall. This point however also establishes that there are no certain underlying rules for the price of gold hence at times you may experience fluctuation in gold prices in Pakistan today.
The Rise in the US Dollar
It is no hidden information that the gold rate in Pakistan today has raised higher than before due to the decapitating value of the PKR rupees. The rise of the US Dollar not only affects the economy of the country but also raises the worth of Gold way higher than the purchasing power Pakistan has. As discussed earlier, while going through a weaker economy, a devious inflationary period, and devastating results of the flash floods, now the country faces higher prices of precious metals ever than before. To make matters worse, low supply and high demand in the market have pressured gold prices in Pakistan today to go up.
Will Cryptocurrency Minimize the Demand for Gold in the Market?
I cannot say with confirmation if cryptocurrency has minimized the demand for gold in the marketplace as there are no historical records to prove such claims. But many do choose crypto over gold as they believe it to be a better choice as a store of value than the lustrous yellow metal. On the other hand, the worth of gold is far less unstable, which makes it an ideal option as a store of value while crypto can only act as a technology stock investment. Moreover, Gold for many years had proved to experience fewer fluctuations in the market, which means no matter how higher the gold rate in Pakistan today, the investors are still willing to stay sincere to their beloved inflation hedge.
Investment in Gold is a Wise Decision
No matter how many factors affect the price of the most popular metal in the world, it remains a good investment for many families in Pakistan. Citizens might face problems while making the purchase, as the price hike has left them with restricted budgets, still, those who are still planning to throw grand wedding bashes this season will easily go ahead with the buying no matter what the Gold price, today is.