KARACHI: The financial snag caused by coronavirus leading to weakening currencies worldwide pushed gold to hit Pakistan’s record high, trading at Rs.103,100 per tola (11.66 grams) on Tuesday, according to traders and analysts.
The price of gold jumped by Rs.1,100 per tola to hit an all time high after the rates in the international market surged to $1,757 per ounce (31.10 grams), with an upward trend seen consecutively for the past three days.
“There are three reasons of the appreciation of gold rates. The first is the global uncertainty, second is the devaluation of the Pak rupee and the third is the regional impact, the ongoing border clashes between China and India,” Ahsan Mehanti, commodity analyst and chief executive of Arif Habib Corporation, told Arab News.
Governments around the world pumped billions of dollars in the economy to support businesses and individuals during the pandemic, which led to deflation of currencies across the globe, pushing the investors to relocate their capital from paper to gold.
Analysts studying the trends believe that gold, classified as assets safe haven by investors, will continue to rise up to $2,000 an ounce as the second wave of coronavirus threatens the global economy.
“Gold is considered among the safest investment assets class,” said Mehanti. “Prices are expected to continue showing an upward trend amid surge in virus infections. In the international market, the yellow metal is projected to hit $2000 mark.”
Another factor for gold jumping to record high in Pakistan is associated with the rise in demand for US dollar to make year-end settlements and delayed inflows from lenders pushed Pakistani rupee to depreciate by 0.61 percent this week — trading at Rs.167.65 against the greenback.
However, Samiullah Tariq, head of research at Pakistan-Kuwait Investment (PKI), said: “$1.5 billion inflows are expected from financial institutions like Asian Infrastructure Investment Bank (AIIB), World Bank, and the Asian Development Bank, which will cool down the currency market.”
According to traders, COVID-19 outbreak and the ensuing lockdowns have hit the gold trade bad as demand for jewelry in the absence of weddings is almost negligible.
“Weddings are one of the major factor that boost demand for gold in the form of jewelry but lockdowns and economic situation arising out of Covid-19 has dwindled the buyers’ purchasing power. We are experiencing close of zero buying,” Abdullah Razak, a jeweler and gold trader, told Arab News.
Traders say the depressed condition has drive many skilled workers out of business who are either sitting at home without jobs or are working as vendors to feed their families.
“There are more than 2000 shops of goldsmiths in Saddar area (of Karachi) alone and more than 50 percent of the skilled labor force is out of work,” Mairaj Ahmed Khan, general secretary of All Pakistan Zargaran Jewelers and Gems Association, told Arab News. “
He said that the prevailing time was very difficult for daily wage earners. “During lockdowns, the well-off traders were generous enough to support their workers but now it seem difficult. In future, it would be hard to find highly trained workers in gold sector if the situation continues to prevail.”
Pakistan meets its demand of gold through imports mainly from Dubai. Between July 2019 and May 2020, the country’s imports declined by 32 percent dropping to $3.2 million due to dying demand for the precious metal.
