Gold crosses Rs500,000 on geopolitical fears

In Pakistan, where gold holds profound economic value and deep cultural significance in weddings and heirlooms, the price per tola has surged past the historic Rs500,000 milestone. This breakthrough to Rs506,362 reflects global trends and local demand, marking a new era for investors and families alike.

The All-Pakistan Gems and Jewellers Sarafa Association reported that gold reached Rs506,362 per tola after gaining Rs12,700 in a single day, while 10-gram gold was sold at Rs434,123, up Rs10,888. On Tuesday, the metal had already jumped to Rs493,662, marking a rapid two-day surge. Silver also rose, reaching Rs9,933 per tola after an increase of Rs64.

International markets exhibited a similar rally. Spot gold hit a record $4,887.82 per ounce, while US February gold futures climbed 1.7% to $4,844.20. Platinum also reached a historic high of $2,543.99 per ounce.

Analysts point to a combination of geopolitical tensions, policy uncertainties, and "dollar debasement trade" as key drivers. Investors are increasingly seeking safe-haven assets amid concerns over the US dollar and global instability.

Historically, gold has experienced one of its most remarkable bull runs in decades. Data from NYU.edu and YCharts shows gold returned 26% in 2024 and a staggering 64.3% in 2025, the highest annual return since the 126.5% surge in 1979. In 2026, gold has already gained 10.1% year-to-date as of January 20, representing a cumulative 100% gain over two years.

Experts note this performance rivals some of gold's strongest historical rallies, including in 1973, 1974, and 1979, but unlike past surges, it is occurring even as major central banks, including the US Federal Reserve, maintain steady interest rates.

Geopolitical uncertainty continues to underpin the rally. US President Donald Trump's controversial statements regarding Greenland, ongoing regional conflicts, and strains in US-Europe relations have heightened safe-haven demand.

"Geopolitical tensions remain the primary factor driving prices," said Adnan Agar, Director at Interactive Commodities. He added that rapid policy changes in the US have eroded confidence in the dollar, leading investors to favour gold as the only reliable alternative.

The rally extends beyond gold, with platinum and other precious metals seeing broad-based strength. Global central bank purchases, retail investor demand, and expectations of continued accommodative monetary policies are further supporting the market.

For Pakistan, the implications are substantial. Higher gold prices increase costs for jewellers and consumers, while investment demand rises as a hedge against currency volatility. Traditional gold savings, often used in weddings and inheritance, are seeing renewed interest, and imports of precious metals may impact the trade balance.

While the current rally is historic, analysts caution that corrections are possible. Past cycles show sharp declines can occur during policy shifts, such as the 32.6% drop in 1981 during Volcker rate hikes or the 27.6% fall in 2013 amid the "taper tantrum." Investors are now closely monitoring central bank purchasing data and global geopolitical developments to gauge whether gold can sustain its record ascent.

Meanwhile, the Pakistani rupee edged up slightly against the US dollar, closing at 279.91 in the inter-bank market, a marginal gain of Rs0.01 from Monday's close at 279.92.

The dollar weakened globally to its lowest level in a week after White House warnings to the European Union over Greenland sparked a broad sell-off in US stocks and government bonds.