Rushing to the yellow metal
It may sound weird that the price of gold is fixed daily based on domestic and international economic indicators despite the discontinuation of its official import over a decade ago, but that is the reality today.
Stakeholders of various commodities usually fix prices based on local and import taxes and duties, demand and supply situation, and rupee-dollar parity.
Perhaps the yellow metal is one of the only commodities over which no official or private data regarding purchase and use is maintained or available, owing to the lack of its official imports.
Bullion prices have been making headlines worldwide and in Pakistan since the US president began imposing record-high tariffs on China and other countries. Since then, gold prices continue to break new records every week in Pakistan despite rupee-dollar stability for the past one and a half years.
Speculation in gold trading has resurfaced, causing daily disparity in domestic rates
The 10 grams and one tola gold rates have skyrocketed by Rs111,711 and Rs130,300, respectively, from January 1, 2024, till April 17, 2025, to Rs300,068 and Rs350,000, respectively, owing to a $1,247 per ounce jump in world gold price to $3,329 per ounce in the above period. A single dollar continued to sell at Rs280 in the interbank market in the above period.
As the result of a persistent rise in domestic prices, backed by rising global prices and investors’ active participation, speculation in gold trading has surfaced again, causing disparity in the rates issued by the All Pakistan Sarafa Gems and Jewellers Association (APSGJA) versus open market rates.
Traders said the one tola gold rate ranges between Rs356,000 and Rs357,000 instead of Rs350,000 as announced by the APSGJA, thus challenging the writ of the association’s role in claiming uniformity in prices in the markets.
Consumers are the losers owing to the price difference between the rates issued by the association and open market rates.
A similar situation emerged one and a half years ago, which led to the arrest of five jewellers by law enforcement agencies over a lack of transparency in local rates, speculation, malpractice, hoarding and smuggling.
The jewellers were later released after the assurance by the gold trade body representatives that they would maintain transparency, documentation, and computerisation in the trade, besides controlling speculations that led to the price hike.
A gold trader said that the gold rates issued by the APSGJA are not based on trading at the Karachi Bullion Exchange (KBE); instead, they are being determined by the interbank rupee-dollar parity. The open market rates of gold for consumers are higher. The KBE was reopened some 25 days ago after remaining closed for six months to curb Hawala and Hundi activities and speculation.
KBE was shifted to Zaibunnisa Street area five years ago from Kharadar. The KBE premises comprise a trading hall, including brokers’ desks, trading shops, and monitors for viewing world gold prices. Trading remains active between 4pm and 8pm daily. Traders from all over the country pay visits to the KBE to lift and sell gold. The benchmark of trading is at least 10 tola (biscuit or bar).
However, consumers appear sceptical about the criteria for the fixation of daily gold rates when not a single kilogram lands in the country through official channels for domestic consumption.
Negligible import volumes of precious metals available on the Pakistan Bureau of Statistics’ (PBS) website are related to the imports made by gold jewellery exporters under a scheme of the State Bank of Pakistan (SBP). As per PBS data, official gold imports during 9MFY25 rose to 368kg ($28 million) as compared to 262kg ($17m) in the same period last fiscal year.
Market traders and trade body representatives try to skip any query over the criterion of fixing the rates daily based on the interbank rupee-dollar parity and import price. “Gold is not an edible item. It does not have any notable consumption. It means the shining commodity does not create any crisis-like situation like any food item,” President APSGJA Mohammad Qasim Shikarpuri explains, trying to justify the daily price fixation method.
“Since the US trade war with other countries, especially China, has escalated, investors mainly revolve around gold rather than the US dollar and real estate. Investors rule in purchasing and selling the yellow metal,” he said.
In Pakistan, investors are in the run for gold while consumers are on the sidelines, unable to bear its prices. As long as the US and China are trying hard to beat each other on imposing fresh tariffs, the world gold price will continue to break new records, Mr Shikarpuri claimed.
When asked how gold demand is met in case investors are piling up inventories for profit making, he explained that while new gold was mined, old gold, in the shape of biscuits, bars and jewellery held by families, also found its way into the market at a time of buying jewellery.
Mr Shikarpuri said that “While documentation is still missing, there is no speculation. Proper documentation or computerisation of trade can be achieved in case the government allows legal imports. This will also encourage traders towards documentation and integration with point of sale [POS],” he said, adding that there might be 27,000 integrated POS gold jewellery shops.
As the US tariffs could potentially change market dynamics, countries with huge gold reserves are further building up gold reserves for safe-haven purposes.
Given that Pakistan holds negligible gold reserves, Mr Shikarpuri says, “The government and the State Bank should seriously consider piling up gold reserves instead of focusing on US dollar reserves.” Currently, he claimed that the markets are facing a gold bar shortage owing to the investors’ rush.
Many consumers are in a quandary, as they cannot even dream of making gold jewellery sets for their daughters. They come in with the old jewellery sets to use in a new design while asking jewellers to add 10-20 grams instead of purchasing all-new, two- to four-tola gold sets. On the other hand, the severe dearth of buyers casts a gloom on the small- to medium-sized gold jewellers in regard to managing their monthly power bills and employees’ salaries.
As consumers appear to be in a hurry to sell old gold jewellery to meet urgent requirements, they undergo a nail-biting selling experience. Without any know-how of the yellow metal, jewellers confuse consumers on gold classification in terms of 18 karat, 22kg and 24kg, which causes huge price disparity. Ultimately, consumers lose at the hands of jewellers. This deal is struck between the buyer and sellers without any paper documentation or receipt.
That said, some gold jewellers believe there should be a government regulatory body to fix the daily rates of gold to build up consumers’ confidence, which would also help maintain price uniformity and curb speculation.
Published in Dawn, The Business and Finance Weekly, April 21st, 2025