As Pakistan's local currency, the rupee plunged to a new all-time low versus the US dollar on Wednesday, the capital markets there grabbed headlines. Amid domestic political unrest, gold prices also reached a fresh record high of Rs240,000 per tola.
The local currency declined 1.85%, or Rs5.38, in a day to settle at Rs290.22 in the interbank market, according to the State Bank of Pakistan (SBP). In the meantime, figures from the Exchange Companies Association of Pakistan (ECAP) indicated that the open market exchange rate of the rupee had decreased by 2.35%, or Rs7, to Rs297/$. Just 3 rupees separate the new pricing from the much-expected exchange rate of Rs300/$.
In Pakistan, where inflation reached a six-decade high of 36.4 percent in April 2023 due to the depreciation of the rupee, import costs have increased as a result of the accumulation of international debt without the use of fresh external loans.
Samiullah Tariq, Head of Research at Pak-Kuwait Investment Company (PKIC), told The Express Tribune that the rupee's decline was brought on by the political and social upheaval that followed Imran Khan's incarceration.
According to recent sources, the International Monetary Fund (IMF) loan program has also been further delayed. Moody's noted that without the loan, there is a greater chance that the country will fail to repay its foreign debt.
According to Tariq, "Recent events have increased pressure on the rupee against the US dollar." He observed that while demand for US dollars had remained weak, supply had grown in the interbank market recently.
Exporters may have stopped selling foreign currency due to speculation that the rupee will weaken further due to political and economic concerns, while importers may have hurried to purchase US dollars before the price rose. According to him, the rupee's devaluation and the rise in gold prices may have been caused by this shift in the demand and supply of foreign currency on the interbank market. He believed that in a day or two, the political climate will improve, allowing the currency to settle around its current levels or gain some ground against the US dollar.
Despite holding steady at $2,031 per ounce (31.10 grams) on the global markets the previous day, gold prices in Pakistan climbed by 4.30 percent or Rs9,900 per tola in a single day, setting a new record high of Rs240,000 per tola.
The most recent currency devaluation, according to Abdullah Abdul Razzak, a member of the All-Pakistan Saraf Gem and The jewelers Association, had a direct impact on gold prices in both the open and underground markets of Pakistan. In light of the current political unrest, many people are purchasing gold to prevent currency devaluation. He continued by saying that because there aren't as many US dollars available on the open market, gold has grown to be the most sought-after asset.
According to Adnan Agar, Director of AA Gold Commodities, the US financial crisis will push up gold prices to a new record high of roughly $2,150 per ounce in international markets over the next few months.
"The expected uptrend in global markets will keep the price of gold uncertain within Pakistan as well," the man stated.
Because the current market spike could be followed by a drop, he advised investors to exercise caution. Gold must correct before hitting the projected new highs, and if it did, investors would profit more. Furthermore, a climb would be challenging to maintain.
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