Over the past 25 days, Pakistan has witnessed a significant drop in domestic 24-karat gold rates, with prices falling by around Rs20,000 per tola (11.7 grams). This decline is attributed to a combination of factors, including a government crackdown on speculators, a stronger rupee, and a decrease in global market rates.
The All Pakistan Gem and Jewellers Association (APGJA) halted its daily rate announcements on September 13, leaving traders to quote prices based on their discretion. The association’s president, Haji Haroon Rasheed Chand, has repeatedly given new dates for the resumption of daily rate announcements, with the latest slated for October 9.
As of Saturday, the price of 24-karat gold ranged between Rs194,000 and Rs196,000 per tola, depending on the global market rate of $1,832 per ounce. This marks a significant drop from the Rs215,000 per tola observed on September 12 when the world market rate was $1,911 per ounce.
The contrast becomes even more striking when compared to gold’s price in the second week of May when it reached a historic high of Rs240,000 per tola, with global prices at $2,031 per ounce and the dollar trading at around Rs288.
As of October 6, the dollar’s exchange rate stood at Rs282.75, a decrease from Rs299.75 on September 12 and its peak of Rs307 on September 5.
Gold shops in Pakistan have seen reduced activity since the brief detention of five gold traders during a crackdown against speculators and smugglers. These traders were later released on assurances from Mr. Chand, the APGJA president, regarding promoting legal trade, encouraging documentation, computerization of trade, and issuing daily market rate updates. However, the anticipated changes have not yet materialized in the market.
Despite the drop in gold rates, customers are facing difficulties in finding small gold bars. Retailers are instead promoting jewelry sales, citing a shortage of gold bars in the market. Some customers suspect that traders are holding onto gold bars with the expectation of selling them at a profit when domestic rates increase due to rising global prices or other factors.
Jewelers argue that the shortage of smaller gold bars is due to purchasers, particularly those who previously bought at higher rates, being reluctant to sell in the face of falling prices. Investors have adopted a wait-and-see approach following the recent crackdown, the rupee’s rise, and declining gold prices.
Mohammed Sohail, CEO of Topline Securities, noted that speculators are swiftly converting their dollars and gold holdings into cash due to the crackdown and the ample supply of dollars in the open market. This, combined with the falling global gold rates, has impacted domestic prices.
Mohammad Arshad, chairman of the All Pakistan Jewelers Manufacturers Association, believes that the current drop in gold prices may encourage genuine buyers and middle-income families to purchase jewelry sets during the ongoing peak wedding season, especially as investors take a cautious stance following the government crackdown.
Previously, rising gold prices, increased power bills, and soaring food prices had affected jewelry sales, causing many to limit their purchases to lower-weight sets. Some individuals even resorted to selling small gold items to cover their utility bills.
