Gold Rates in Pakistan and why is it getting expensive day by day

Gold is regarded as one of the most valuable metals on the world. Gold is also regarded as a valuable commodity in Pakistan. It is considered as a valuable commodity only owned by the wealthy. Normally, gold is used to make jewellery. It can also be utilised for industrial and investment purposes. It is one of the most precious metal used for the diversification of risk is gold. The main purpose behind investing in gold is for the use of futures contracts and derivatives, therefore it is considered as one of the most secure investment. The value of gold is equal to money, but with the fluctuation in the gold market, price of gold never remains the same. As gold is imported in Pakistan from the Arabian states, therefore, fluctuation in price mainly depends on Dollar rate.

The rates of gold are adjusted as per its quality, and also on its weight. Pakistan is a seller of 22 and 24 Carats of gold. When it comes to jewellery, the price not only depends on the weight but also the design. Gold rate nowadays fluctuates around 96,558 per 10 grams, 112,506 per 1 tola and 300,334 per ounce.

Gold Price Per Carats

This is the current gold rate as per forex.pk.

This instability in price each day gives rise to the question of why does the cost change? The answer to this question may not be as simple as it seems, but one main reason behind instability is that, due to the changing rates of Dollar per day, investors seek out finding a balanced source of investment and so they invest in gold.

Significance of Gold

The strength of the economy is reflected in the price of gold. Gold’s high price indicates that the economy is not in good shape. When investors want to secure their money against inflation or a catastrophe, they prefer to invest in gold. A drop in gold prices signals a strong economy. This occurs when investors prefer to invest in other asset classes such as equities, bonds, and real estate rather than gold. People buy gold to compensate for stock market losses, to protect against inflation, and to counterbalance a weakening currency. As a result, gold is frequently seen as a secure investment.

Factors that Drive Price of Gold

People who were investing in the stock market started investing in gold, which is why Pakistan is regarded the world’s top ten consumer of gold. As a result, the demand for gold in Pakistan has grown, despite the fact that Pakistan is a tiny gold producer. Throughout the time, gold industry has seen many phases, from lower to higher rates there is always much fluctuation in the price of gold. The price of gold is influenced by a number of distinct variables rather than a single reason. Here are some of the major factors that influence gold prices:

1. Inflation – Inflation is a process that disrupts the whole economic system; as a result of the disruption, increased costs of products, and devaluation of money, no one invests their savings or surplus in an unstable economy, and FDI flows into the country are also disrupted. Inflation controls the price of gold, in simpler words, gold and inflation are interdependent and related, when there are higher inflation rates the gold rates increase sharply.
2. US Dollar Value – As gold is a dollar-denominated commodity, its price is typically inversely connected to the value of the US dollar. A stronger US currency, all else being equivalent, likes to keep gold prices lower and more under control, whilst a weaker US dollar tends to drive gold prices higher by increasing demand. When prices rise, inflation occurs, and when the value of the dollar lowers, inflation occurs as well. The price of gold rises when inflation rises.
3. Bank Reserves – Paper currencies and gold are held in reserve by central banks. The price of gold generally rises as central banks diversify their monetary reserves away from the paper currencies they’ve collected and toward gold. Many countries have gold reserves that are largely made up of gold.
4. Demand – Gold price development throughout time is significantly influenced by a country’s or region’s wealth and economic progress. This is because economic booms boost gold demand, which includes demand for coins, bullions, and gold-backed securities. Gold is only purchased in bigger amounts over a particular level of income, and this is true for both gold as an investment and precious gold jewellery. Luxury items are only purchased by those who can afford them, as seen by the rapid rise in private demand for gold in China in recent years.
5. Stock Market – The stock market of any country depicts its economic performance, say during times of economic prosperity, indexes increase; in times of economic hardship, they fall. These developments are generally medium-term and may, but not always, drive the price of gold. Although the stocks of thriving businesses tend to be appealing alternatives to gold investments, a boom also involves an increase in affluence, which, as previously said, is often reflected in increased demand for gold.
6. Geopolitical Unpredictability – In times of global crisis, the price of gold can be affected for a long-term. In case of geographically restricted dangers or wars might lead investors all over the world to seek safety in safe haven assets, the price of gold can be increased to a noticeable level.
7. Industrial Use – Talking about jewellery, almost half of the gold is sold for this purpose. When it comes to chemical industry, Gold is used extensively as a catalyst, and it is becoming increasingly significant in the medical area. Furthermore, the precious metal is an essential component of many mobile applications, such as smart phones and smart wearables, due to its high ductility and conductivity. This is a region where future growth rates are projected to be high, which will likely boost gold prices.

Conclusion

Gold has captivated us for a long time and will certainly continue to do so in the future. Demand for gold, the quantity of gold in central bank reserves, the value of the US dollar, and the desire to retain gold as a hedge against inflation and currency devaluation are all factors that influence the price of the precious metal today.