Pakistan's gold market in turmoil as buyers disappear amid government crackdown

Wed Oct 06 2023

Pakistan’s gold market has come under increasing pressure in recent weeks after the government launched a crackdown on the sector to combat smuggling and tax evasion, according to local media reports.

The new measures were put in place after the rupee underwent a massive decline towards the end of the summer, which prompted gold traders to sell the precious metal near record highs by the end of August.

The government formed a task force made up of law enforcement and intelligence agencies to take action against precious metals traders and to clamp down on smugglers.

This crackdown, as well as certain administrative measures in the currency market, caused the rupee to appreciate significantly, with Pakistan’s currency becoming the world’s best performer during the month of September.

Now, gold traders and owners of gold companies are complaining about the lack of activity in the marketplace.

Muhammad Khurram owns a jewelry shop in one of the busiest markets Karachi. “Three out of every four people who enter my store (in one day) come here to sell,” Khurram said. “I can’t even buy jewelry worth Rs 50,000 ($176) because I don’t have any cash. There is no money in the market either.”

Other jewelers said that few customers were looking to buy.

“The market is almost at a standstill as people, who have seen gold rise to around Rs 240,000 ($846) per tola (11.66 grams), do not want to sell below Rs 200,000 ($705),” said one trader, who requested anonymity. “Buyers, on the other hand, are postponing buying because they expect a further decline in the price of gold.”

Gold trader Abdul Karim said business has been declining for several months as hyperinflation reduced buyers’ purchasing power while rising costs forced many with gold holdings to sell.

Haroon Chand, President of All Pakistan Sarafa Gems and Jewelery Association (APSGJA), said the country’s gold market is suffering amid declining sales.

“People are selling small items because they have already sold larger items,” Chand said. “They tell us they were selling these products to pay school fees or medical bills.” However, Chand did praise the government’s crackdown in Peshawar and Quetta.

Gold prices in the bullion market have not been released since September 13, as the government continues its campaign to regulate and streamline the market.

Another trader, who also requested anonymity, said gold prices are currently being set at the individual trader level and no longer track official prices.

“Even if you get the rates, you may not get the gold bar,” he said. “The rates are only used to measure other items associated with gold.”

During Friday trading, the going rate for 24-karat gold was Rs188,000 ($663) per tola, according to local outlet Samaa.TV.

“These rates are obtained from trustworthy sources, mainly based in Karachi and Multan,” they wrote, adding that gold rates in Pakistan can vary several times during the day in response to global market trends.

“However, there has been a gap in the official gold rates released by the All Pakistan Jewelers Association, which typically provides daily gold prices, since September 5, 2023,” they said, adding that the lack of official rates “has left consumers who visit jewelry shops feeling confused.”

Source: https://www.kitco.com