Middle East Tensions Drive Gold Prices to One-Month High in Pakistan

As tensions escalate in the Middle East, the price of gold in Pakistan has surged to a one-month high, reaching Rs214,600 per tola (11.66 grams). This increase is primarily due to the global uncertainty caused by the ongoing conflict in the Middle East. The depreciation of the Pakistani rupee has also contributed to the rising value of gold. Over the past three weeks, gold has experienced an impressive comeback, surging by nearly 9% or Rs17,500, starting from a recent low of Rs197,100 per tola on October 13, 2023.

Experts attribute this increase in gold prices to the conflict between Palestine and Israel, which began in early October. Adnan Agar, the director of AA Gold Commodities, notes that gold has seen a “triple top” near its all-time highs, suggesting the potential for further increases if the Middle Eastern crisis continues.

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However, there is uncertainty about the future of the conflict. If the war escalates, gold prices may rise further, but if diplomacy prevails and peace returns to the region, gold prices could fall sharply.

While some experts believe that gold is primarily trading on paper, others, like Adnan Agar, suggest that many investors are buying physical gold. The future price of gold remains uncertain, and experts cautiously project that it may settle at around Rs218,000 to Rs220,000 per tola during the current crisis.

Fluctuations in gold prices in Pakistan are closely tied to the rupee-dollar exchange rate, as most of the precious metal is imported. The recent depreciation of the Pakistani rupee has played a vital role in determining local gold prices. Additionally, it is estimated that 90% of gold demand in Pakistan is met through smuggling, with only 10% being officially imported, leading to government crackdowns on gold and foreign currency smugglers.

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