All that glitters: The rise and rise of gold in Pakistan

“People with illegitimate or out-of-the-book funds can simply convert their rupees into gold by buying through the Sarafa bazaar. There is no rocket science to it,” says former Federal Board of Revenue chairman Shabbar Zaidi.

Gold prices have been on a rollercoaster lately. When the US-China trade talks seemed to be going well, the precious metal lost some of its lustre before rising back up again. Though not a new phenomenon, the pace of funds flowing into gold has quickened.

On October 20, international prices hit a record $4,328 per ounce, while in Pakistan, rates climbed to Rs448,649 per tola, according to Forex.pk. With no centralised local benchmark, prices vary across platforms. At the time of writing earlier this month, gold prices had fallen by about Rs24,000 to Rs424,197 per tola in Pakistan, and to $4,082 per ounce internationally.

The gold price in Pakistan today as per Forex.pk is Rs430,504 per tola and $4,067 per ounce internationally.

Silver losses

Where there are gains, there are also losses. Haji Muhammad Iqbal, a Lahore-based trader and jeweller, says most buyers don’t understand the swings. “Seasoned traders know when to hold or buy more. But in Pakistan, many buyers aren’t investors — they’re just following the trend.”

He recalls one customer who wanted to “invest” in a single gram of gold at Rs475,000 per tola. “I told him, what kind of investment is one gram?” he laughs.

Many women, too, have been selling jewellery to buy gold bars, assuming they’re making smarter investments. “But the math doesn’t add up,” says Iqbal. “Jewellery involves making charges and wastage, which are lost when you sell it.”

With gold unaffordable for many, some investors turn to silver. “Trading in silver is a very harmful business,” Iqbal warns. “People pay a premium of Rs2,000–2,500 per tola, hoping for quick profits. When prices fall, they first lose that premium — then face losses on the metal itself.”

He’s seen one kilo of silver drop from Rs600,000 to Rs450,000 within days. “The fluctuations are too sharp — they wipe out profits overnight.” Unlike gold, where losses can be recovered over time, silver’s volatility can leave investors with nothing.

Turning towards bullion

Historically, the US dollar has been considered the safest asset class, serving as a hedge against fluctuations in other currencies and asset classes. “During the 2008 financial crisis and the pandemic, the dollar went up because people believed everything else would collapse, but the dollar would remain strong,” says Ali Farid Khwaja, CEO of Oxford Frontier Capital and Co-founder and Chairman of KTrade Securities.

Now, however, the narrative has changed. With rising geopolitical tensions, Trump’s tariffs and the ongoing US government shutdown, confidence in the American system is eroding. Central banks and institutional investors are turning to gold as a hedge against the dollar, driving prices higher.

The Financial Times, citing the European Central Bank, reported: “The demand for gold by central banks remained at record highs in 2024, accounting for more than 20 per cent of global demand, in contrast to around one-tenth on average in the 2010s.” Gold appears poised to supplant US Treasuries as the world’s dominant reserve asset, placing bullion once again at the heart of the global monetary system.

When the US Federal Reserve (Fed) cuts interest rates, investors tend to move funds out of money market instruments and into gold. With expectations of Fed rate cuts building — and tensions between the US and China once again flaring up — gold prices continue to trend upwards.

As global prices rise, the average investment Joe follows suit. In essence, what central banks are doing at scale, ordinary Pakistanis are doing instinctively: protecting value by turning to gold. But while the recent surge in gold prices has been turbocharged, its rise has been a long time coming.

“About half a century ago, I sold gold worth Rs240 per tola. In the early 1990s, unofficially, I sold hundreds of thousands of tolas of gold for Rs3,300 per tola in physical form,” recalls All Pakistan Sarafa Gems and Jewellers Association President Qasim Shikarpuri, a veteran of the trade.

The glitter of gold has not tarnished over the last many decades.

Even recently, gold has outperformed all other asset classes. “If Rs100 had been invested on July 1, 2016, by August this year, it would have been worth Rs773, compared to the second-best option, the KSE-100 Index, which would be worth Rs365. A Rs100 investment in US dollars would have yielded Rs340,” says Faysal Funds CEO Nadir Rahman, in the podcast All Things Money.

Domestic macro winds for gold

Pakistan’s macroeconomic environment also favours gold buying. “Under the International Monetary Fund programme, there is increased scrutiny of the real estate sector,” says Khwaja. “A lot of that money from holding properties is now flowing into lockers and vaults in the form of gold.” Imagine vaults from the 1980s Bollywood era filled with gleaming gold bars, poised for a heist by the dashing, debonair lead.

In Karachi alone, 8,000-10,000 tolas are traded every day, estimates Shikarpuri, with money flowing in from many different businesses as well. Those who trade in other businesses, such as rice or apparel, have turned to gold because it is more profitable, especially in the tough macroeconomic conditions with limited opportunities.

“Never in my life have I seen gold increase by $100 every day,” says Shikarpuri, an old hat at the trade during the period when gold seemed to be scaling a new high every other day. As the US Federal Reserve slashes interest rates, gold will rise further, and money will flow from more productive activities towards bullion.

Add to that a cultural affinity for gold, ease of purchase — no identification or documentation required — and its liquidity: one can walk into a jewellery shop, buy gold, keep it at home, and sell it when cash is needed. No wonder there is FOMO when it comes to investment in the shiny metal.

Local trading avenues

Gold in Pakistan is traded through multiple channels. For investors and jewellers, the primary sources remain the Karachi Bullion Exchange and ARY Gold, while everyday buyers typically purchase gold biscuits directly from jewellery shops at slightly higher prices.

“Technically, in Pakistan, jewellery made from new gold should not be sold in shops,” says Khwaja. “Legally, jewellers are only allowed to take gold from consumers, make jewellery out of it, and sell it to you. Clearly, that is not the case in Pakistan, where jewellery as well as bullion is sold.”

Trading and purchases of gold also take place on the Pakistan Mercantile Exchange (PMEX), a regulated platform that allows gold commodity trading and purchases — including millitola, a smaller denomination designed for everyday investors. On October 14, PMEX recorded its highest-ever single-day trade volume of Rs128 billion, of which Rs84.6bn was in gold and Rs24.5 billion in silver — metals that generally move in the same direction.

However, Khwaja explains that while PMEX is legal, its reach remains limited. The amount of gold it can sell is capped, and demand often exceeds supply. Moreover, because it is regulated and taxed, buying through PMEX is more expensive. “It’s easier and cheaper to buy gold from jewellers, which is what the man on the street in Pakistan knows and understands. People are familiar with physical gold; asking them to buy through PMEX offers no real incentive.”

The informal gold frontier

Spot buying — what Shikarpuri calls the ‘Satta mafia’ — also takes place informally on social media platforms like WhatsApp, though crackdowns by authorities have wiped out nearly 90pc of such activity.

Gold in Pakistan is among the cheapest in the world, says Shikarpuri. Perhaps, he explains, it’s because it is mined unofficially from Balochistan— from areas like Saindak and Reko Diq — and has been quietly entering the market over the past three years. At the time of the conversation last month, gold was underpriced by Rs10,000–12,000 per tola compared to global rates, and earlier this year it was discounted by as much as Rs19,000.

The demand for gold is an equation of many variables, the dollar not being the least of them. As the US-China ties blow hot and cold, and Trump upends the economic and political order as we know it, the price of gold fluctuates. And along with it, the fortunes of many small gold investors in Pakistan.

The writer is the head of the weekly Business & Finance desk at Dawn and a host of All Things Money. She tweets @FatimaAttarwala