Pakistan's gold price surges to all-time high amid global recession fears

August 03, 2024 (MLN): Pakistan’s bullion market glittered this week as its key benchmark rallied to a new all-time high following a global surge and a relatively weaker local currency.

24-karat gold gained Rs4,300 per tola to settle the week at Rs256,800, just Rs500 shy of its new peak reached a day ago.

This positive journey follows a period of challenges. For a significant period before July, the gold market was hit by weak purchasing power in the country. Subsequently, gold dealers were forced to lower the prices as they went above the affordability of many customers.

This acted as a major constraint and capped the gains of the strong rally that was being delivered by the international gold.

However, prices have now made a strong comeback as price restrictions have been eliminated by gold dealers for quite a few weeks, coupled with a rising international rally.

Interestingly, gold price in Pakistan is up Rs36,800 per tola or approximately 17% this year. In comparison, Pakistan’s benchmark stock index has risen by 25.3% during the same period.

On the global front, fears of an oncoming recession are currently lingering over the financial markets due to the recent weaker US data on employment.

The report revealed that unemployment in U.S. rose to 4.3% in July, an unexpected figure and the highest level in nearly three years, triggering an economic alert.

This news turned out to be blossoming for the non-yielding asset as it strengthened investors' hopes for an interest rate cut in September, which is bullish for the metal. 

What further created wonders for gold were the extended Middle East tensions, which continued to support its record-breaking rally.

Consequently, international spot gold climbed 2.32% or over $55 per ounce this week to close at $2,442.5.

It is worth mentioning that Pakistan’s currency also had a major role in supporting gold prices this week.

The Pakistani rupee (PKR) has remained stable against the strong U.S. dollar for a prolonged period, which generally benefits local gold. 

This stability allows changes in international gold prices to have a more direct impact, as the local market remains shielded from currency fluctuations.

On a weekly basis, the home currency registered a loss of over Rs16 paisa against the mighty Dollar.

Since gold is denominated in U.S. Dollar terms, when PKR depreciates against the greenback, the value of PKR-denominated gold rises.

Copyright Mettis Link News