In a surprising turn of events, a combination of government measures aimed at curbing speculation, a strengthening rupee, and a decline in global market rates have led to a substantial drop of approximately Rs20,000 per tola in domestic 24-karat gold prices over the past 25 days.
The All Pakistan Gem and Jewellers Association (APGJA) halted its daily rate announcements on September 13, leaving traders to quote prices based on their own discretion. Haji Haroon Rasheed Chand, the association’s president, has announced several resumption dates, with the latest being October 9.
As of Saturday, the 24k gold price fluctuated between Rs194,000 and Rs196,000 per tola (equivalent to 11.7 grams) based on the global market rate of $1,832 per ounce. This represents a significant decrease from the Rs215,000 per tola on September 12 when the world market rate stood at $1,911 per ounce.
Saturday’s gold rates are even more striking when compared to the second week of May, when gold reached a historic high of Rs240,000 per tola, coinciding with global prices at $2,031 per ounce and the dollar’s exchange rate at approximately Rs288.
As of October 6, the dollar’s exchange rate stands at Rs282.75, a noticeable decrease from Rs299.75 on September 12 and the peak of Rs307 on September 5.
Recent law enforcement actions targeting speculators and smugglers resulted in the brief detention of five gold traders. They were subsequently released following assurances by Mr. Chand, the APGJA president. Chand has promised law enforcement officials to promote legal trade, encourage documentation and computerization of trade, shift from speculative to physical trading on a weekly basis, and provide daily market rate updates. However, these changes have yet to materialize in the market.
Despite the drop in gold prices, customers are struggling to find small gold bars. One resident from Karachi’s Saddar town, Mohammad Aslam, voiced his difficulties in finding 10 grams or one-tola gold bars for his granddaughter’s birthday gift. Retailers are reportedly pushing jewelry sales instead, citing a shortage of gold bars in the market.
Some suspect that traders have intentionally reduced the availability of gold bars, hoping to profit later when domestic rates rise again, potentially due to increasing global prices or other factors. However, jewelers claim that the shortage of smaller gold bars is a result of purchasers, especially those who previously bought at higher rates, now hesitating to sell due to falling prices. Investors are adopting 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 quickly converting their dollars and gold holdings into cash due to the crackdown and the ample supply of dollars in the open market. This, coupled with the decline in world gold rates, has had a significant impact on domestic prices.
Mohammad Arshad, chairman of the All Pakistan Jewellers 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. This comes at a time when many investors are watching from the sidelines following the government crackdown. Previously, rising gold prices, along with increased power bills and soaring food prices, had led to a decline in jewelry sales, prompting many to limit their purchases to low-weight sets, and some even resorting to selling small gold items to cover their power bills.
