Explainer: Why gold prices are falling in Pakistan

KARACHI: The recent downward trend in gold and silver prices in Pakistan has been driven by multiple global and domestic economic factors, analyst say.

Speaking on ARY News programme On My Radar with Kamran Khan, CEO of Topline Securities Muhammad Sohail explained the reasons behind the sharp decline in precious metals after a prolonged rally.

Gold prices in international markets had previously surged to around $5,500 per ounce earlier this year, while in Pakistan the per tola rate had crossed Rs500,000 mark. However, prices have since dropped to nearly $4,000 per ounce globally and around Rs419,000 locally.

Similarly, silver, which had reached a peak of nearly Rs12,000 per tola in Pakistan, has now dropped to around Rs6,000.

Sohail noted that although prices have declined significantly in recent months, they remain nearly double compared to levels seen two to three years ago, when gold traded around $2,000 per ounce.

He said one of the key reasons behind the recent decline is a shift in global economic sentiment following geopolitical developments, including tensions linked to Iran and changing inflation trends.

According to him, investors initially moved towards safe-haven assets such as gold and silver during periods of uncertainty. However, rising interest rates in the United States and other major economies have made fixed-income assets more attractive, prompting investors to shift funds away from precious metals into higher-yielding investments.

He added that a stronger and more stable US dollar has also contributed to selling pressure on gold, as investors increasingly prefer dollar-denominated assets.

Sohail further said that some major economies, including China, have slowed their gold purchases after a prolonged buying cycle, which also contributed to easing prices.

He also linked the earlier surge in gold and silver to post-COVID market behaviour, saying that increased participation from retail investors and younger traders relying on social media trends, digital platforms and algorithm-driven advice led to speculative buying.

This, he said, contributed to sharp price volatility not only in gold and silver but also in other assets such as cryptocurrencies, including Bitcoin, which has also seen significant swings in value.

The analyst noted that during periods of geopolitical tension, including conflicts in the Middle East, investors typically shift towards precious metals. However, in the recent cycle, some investors instead focused on energy and commodity-linked sectors such as oil and fertilizers due to expectations of supply disruptions.

With geopolitical tensions easing, particularly around Iran-related developments, risk sentiment has improved, reducing demand for safe-haven assets.

Sohail said the decline in “risk premium” and expectations of sustained high interest rates have made gold less attractive for investors. If US interest rates remain between 4% and 4.5%, he added, gold may continue to face limited investment appeal.

He further warned that speculative trading and rapid digital investing trends have amplified volatility in global markets. Easy access to trading platforms has encouraged frequent buying and selling, increasing short-term price swings.

According to him, future investment flows may shift toward fixed-income assets or emerging sectors such as artificial intelligence, which could further reduce demand for gold and silver if current macroeconomic conditions persist.