When the topic of gold arises, it invokes images of opulence, luxury, and extravagance. Gold has captivated human attention for centuries and has been cherished for its purity and rarity. The allure of this precious metal had led to its mining, trading, and processing across the globe, and its worth has been universally recognized since ancient times when it served as a currency.
In Pakistan, gold is held in high regard as a valuable asset, often used for crafting exquisite jewellery or as a reliable investment option. As a developing country with an unpredictable exchange rate and ongoing balance of payment crisis, the price of gold in Pakistan is prone to fluctuation, making it a highly coveted and expensive commodity.
In this blog, we will explain how the price of gold is determined in Pakistan and how it is affected by different factors.
Factors Affecting Gold Price
Several factors can affect the price of gold in Pakistan:
Global Demand and Supply:
Like any other commodity, the demand and supply of gold affect its price. If the demand for gold is high and the supply is low, the price of gold tends to increase, and vice versa.
US Dollar Value:
As gold is priced in US dollars globally, the US dollar’s value can impact the gold price in Pakistan. When the US dollar strengthens, the gold price tends to increase, and when it weakens, the price of gold tends to decrease.
Geopolitical Tensions:
Political tensions and instability in different parts of the world can increase the demand for gold as investors seek a safe-haven asset. In such cases, the price of gold tends to increase.
Inflation:
Inflation can also have an impact on the price of gold. In times of rising inflation, investors may use gold as a hedge to protect against it, leading to an increase in the demand for gold and subsequently, its price.
Interest Rates:
Interest rates also affect the gold price. In case of low interest rates, investors may prefer to hold gold as an investment option, which can increase its demand and price.
Central Bank Reserves:
Central banks of different countries hold gold reserves, and their buying and selling activities can impact the price of gold in the global market.
What is a Karat?
Karat (also spelt as “carat”) is a term used to specify the purity of gold. It is a measure of the proportion of gold in a piece of jewellery or other gold items, expressed in part of 24. For instance, 24-karat gold is considered to be pure gold, while 18-karat gold means that 18 parts of the item are made of gold, and the remaining six parts are made of other metals such as copper or silver.
In other words, karat is a measure of the amount of pure gold in a particular gold item. The proportion of pure gold in an item increases as the karat value increases. For instance, 14-karat gold contains 14 parts of pure gold and ten parts of other metals, while 10-karat gold contains ten parts of pure gold and 14 parts of other metals.
It’s important to note that different regions and countries may use different systems to denote the purity of gold. For instance, in some countries, the term “fineness” is used to express the proportion of pure gold in a gold item. In such cases, the fineness of gold is expressed in parts per thousand rather than parts of 24, as in the case of karat.
FAQs
Why Does the Gold Price in Pakistan Fluctuate So Much?
The gold price is subject to various factors that can influence its demand and supply, including global economic conditions, political instability, inflation rates, and currency exchange rates. As a result, the gold price can be highly volatile and subject to rapid fluctuations.
Is It Good to Invest in Gold in Pakistan?
Investing in gold can be a good option for individuals looking for a safe-haven asset to protect their wealth. However, it’s important to note that gold prices can be volatile, and investing in gold should be part of a diversified investment portfolio that includes other assets like stocks and bonds.
What Are the Different Ways to Invest in Gold in Pakistan?
There are several ways to invest in gold in Pakistan, including buying physical gold in the form of jewellery, gold coins, etc. Before investing, it is essential to analyze each investment option’s advantages and disadvantages and consider personal factors such as risk tolerance, investment horizon, and other relevant considerations. Each investment option comes with its own set of benefits and drawbacks, and it is important to weigh these factors to make an informed investment decision.
