Gold prices hits historic high in Pakistan amid global rally

KARACHI: The price of 10 grams of gold in Pakistan exceeded Rs400,000 for the first time in history on Tuesday, after prices in the international market crossed $4,480 per ounce.

According to the All Pakistan Gems and Jewellers Association, the price of 10 grams of gold rose by Rs7,288 to Rs403,688, while the price per tola increased by Rs8,500 to nearly Rs471,000.

The surge marks the fastest rise in gold prices since the 1970s, with prices having climbed by nearly 50 per cent since April.

Amid global economic and political uncertainty, investors are turning to gold as a safe haven, driving a sustained rise in both international and domestic gold prices.

Gold is widely regarded as a safe investment, as its value is expected to remain stable or rise during periods of financial crisis or economic slowdown.

Experts say global trade has been affected since the announcement of trade policies by US President Donald Trump, and the current rally is being attributed to these restrictions as well as expectations of interest rate cuts.

According to Christopher Wong, an analyst at Singapore-based OCBC Bank, the US government shutdown has also contributed to the rise in gold prices.

In the past, government shutdowns in the United States have prompted investors to shift towards safe assets such as gold. During a one-month shutdown in Trump’s first term, gold prices rose by nearly four per cent.

Hang Kuan Hau, an analyst at UOB Bank, said the unusually sharp rise in gold prices over the past month has far exceeded analysts’ expectations.

He added that a weaker US dollar and growing interest from retail investors have also played a key role in pushing prices higher.

Not all investors buy physical gold in the form of coins or bars. Many choose financial instruments such as gold exchange-traded funds (ETFs), which are backed by physical gold.

According to the World Gold Council, more than $64 billion has been invested in gold ETFs so far this year.

Gregor Gregersen, founder of precious metals dealer and storage firm Silver Bullion, said his company’s customer base has more than doubled over the past year.

“Given the uncertainty in the global economy, many investors, banks and wealthy families now view gold as a safe investment,” he said.

Gregersen added that most of his clients hold gold for the long term, with the majority storing it for more than four years.

However, the question many are asking is whether gold prices will continue to rise.

Gregersen said that while prices are bound to fall at some point, he expects the upward trend to continue for at least the next five years under the current economic conditions.

Gold prices typically fluctuate. OCBC’s Wong noted that prices generally fall when interest rates rise or when international conflicts and political uncertainty ease.

For instance, gold prices fell by nearly six per cent in April after Trump abandoned his decision to remove Federal Reserve Chair Jerome Powell.

Wong cautioned that while gold is often seen as a hedge against uncertainty, it can also incur losses.

UOB’s Hang recalled that in 2022, gold prices fell from nearly $2,000 per ounce to $1,600 after the US central bank raised interest rates to curb inflation following the Covid-19 pandemic.

He warned that a sudden spike in inflation could once again force US banks to raise interest rates, posing a risk to the current gold rally.

Wong said markets currently expect interest rates to be cut, and if that happens, investor interest in gold is likely to increase further.

It is worth noting that President Trump has intensified pressure on the US central bank, criticising it for not cutting interest rates quickly enough. He has also attempted to remove Governor Lisa Cook.

According to Wong, public criticism of the central bank by the US president could undermine confidence in the institution.

In such an environment, interest in gold — and its role as a hedge against economic uncertainty — may become even more significant.