Introduction to the Rise in Gold Prices and Rupee Stability
Gold prices in Pakistan witnessed a notable surge on Friday, aligning with the global price increase. Locally, the cost of gold per tola jumped by Rs1,100, reaching Rs279,400. This rise follows a similar upward movement observed on Thursday, where the price had already increased by Rs1,300. The global economy played a role in this fluctuation, and local factors, including the behavior of the rupee, further contributed to the overall economic picture.
Global Gold Market Trends
Gold Prices on the International Stage
International gold prices have also experienced a rise. As per the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA), the global rate for gold surged to $2,676 per ounce, reflecting an increase of $11 during the day. This upward trend in global rates often correlates with the local market’s movements.
Why Did Gold Prices Rise?
The increase in gold prices can be attributed to several global and domestic factors. According to Adnan Agar, Director of Interactive Commodities, even though the data was not initially favorable for gold, it rebounded due to positive economic indicators from the United States. A critical aspect of this surge was the strong US economic data, which saw the unemployment rate decrease to 4.1%.
Moreover, despite a slight uptick in inflation data showing a 0.32% rise, the US Federal Reserve is expected to pause its rate cuts. This uncertainty in monetary policy leads investors to seek safe-haven assets like gold, further propelling the yellow metal’s value.
Gold Price Impact on the Pakistani Market
Local Price of Gold
In Pakistan, the price of gold surged by Rs1,100 per tola, bringing the total price to Rs279,400. This is the highest price recorded recently and follows a trend that has been observed over the last few weeks. On Thursday, the price of gold had already risen by Rs1,300, setting the stage for the additional hike.
Influence of Global Trends on Local Markets
The increase in gold prices globally inevitably impacts the local market, as Pakistan’s economy is closely linked with international economic conditions. Gold, being a precious metal with global demand, is often seen as a store of value during times of economic uncertainty, and any positive or negative trends in international markets directly affect its price in Pakistan.
The Role of the Rupee in Economic Stability
Rupee’s Performance Against the Dollar
Alongside the rise in gold prices, the Pakistani rupee has shown signs of stabilization against the US dollar. On Friday, the rupee appreciated by 0.01% in the inter-bank market, closing at 278.58, gaining Re0.03 against the dollar. This slight improvement follows a similar pattern of stability seen in the previous day when the rupee stood at 278.61.
Why Is the Rupee Stable?
Zafar Paracha, Chairman of the Exchange Companies Association of Pakistan (ECAP), attributes the stability of the rupee to factors like strong remittances from Pakistani workers abroad. He also notes that other positive economic indicators have contributed to this relative steadiness. This is further reinforced by the State Bank of Pakistan (SBP) purchasing $9 billion in the previous year, which has supported the dollar in the local market.
The central bank’s interventions have helped stabilize the currency, which could otherwise have experienced greater fluctuations. Paracha suggests that if the SBP were to stop purchasing dollars, the rupee could further appreciate, potentially reaching levels of Rs240/$.
The Importance of Remittances in Supporting the Rupee
Increased Remittances Boosting the Economy
Pakistan has seen a significant influx of remittances, which has played a crucial role in the stability of the rupee. In December 2024, the country witnessed a year-on-year growth of 29.3% in remittances, reaching a total of $3.1 billion. This marked a month-on-month increase of 5.6%. The cumulative remittances for the first half of FY25 amounted to $17.8 billion, reflecting a growth of 32.8% compared to the previous year.
How Remittances Impact the Currency Market
Remittances are a vital source of foreign exchange for Pakistan and contribute significantly to stabilizing the local currency. With a large number of Pakistani expatriates sending money back home, these remittances act as a cushion against external shocks, helping to maintain the value of the rupee against other currencies, especially the dollar.
Factors Affecting Gold and Rupee Prices in the Future
Impact of US Economic Data
The US economy plays a major role in determining the global prices of gold and the value of the dollar. Economic indicators, such as the unemployment rate and inflation figures, are key drivers of market behavior. The US unemployment rate dropped to 4.1%, signaling economic strength, which could lead to further inflationary pressures. The Federal Reserve’s response to these data points will significantly influence the market in the near future.
Central Bank Policy and Future Expectations
The Federal Open Market Committee (FOMC) meeting in January is expected to address the ongoing economic developments. Given the positive job creation data and rising inflation, the Federal Reserve might pause its rate-cutting cycle. This decision will have far-reaching consequences on both gold prices and currency values globally.
FAQs
1. Why did gold prices increase in Pakistan?
Gold prices in Pakistan rose due to the global upward trend in gold prices and favorable US economic data. Additionally, concerns over inflation and uncertainty in monetary policy further contributed to the increase.
2. What is the current price of gold per tola in Pakistan?
As of the latest update, the price of gold per tola in Pakistan has reached Rs279,400, reflecting an increase of Rs1,100 from the previous day.
3. How does the rupee’s performance impact gold prices?
The performance of the rupee against the US dollar affects the price of gold in Pakistan. A stable or strengthening rupee can lead to more affordable gold prices, while a weakening rupee can push prices higher.
4. What factors influence the rupee’s stability?
The stability of the rupee is influenced by factors such as strong remittances, positive economic indicators, and the actions of the State Bank of Pakistan in supporting the currency.
5. How do US economic indicators impact gold prices?
US economic indicators, such as unemployment rates and inflation data, impact gold prices. Positive economic data tends to reduce gold’s appeal as a safe haven, while rising inflation or uncertainty can increase demand for gold.
SEE ALSO
https://flarenews.pk/2025/01/11/pm-urges-focus-on-girls-education-in-muslim-countries/
