Something strange is happening in Pakistan’s markets. The real estate bubble has cooled, the stock exchange wobbles between hope and panic, and the rupee keeps losing its footing. But in the narrow lanes of Karachi’s Sarafa Bazaar, a different story glitters. Small traders, speculators, and quietly anxious investors are all chasing the same thing: a safe place to park their money, away from the chaos of banks and the scrutiny of regulators. And they’ve found it shining right in front of them — gold.
“People with illegitimate or out-of-the-book funds can simply convert their rupees into gold by buying through the Sarafa bazaar or ARY Gold. There is no rocket science to it,” said Shabbar Zaidi, former chairman of the Federal Board of Revenue (FBR).
Although this is not a new reality, funds have been flowing into gold at a faster rate as it reaches new highs.
In spot trading last month, gold crossed the $4,300 per ounce mark for the first time, according to data from the World Gold Council. The surge in international prices drove domestic rates higher as well, with prices per tola ranging from Rs451,420 on Forex.pk to Rs456,900, as per media sources.
In the absence of a centralised benchmark, quoted rates vary across reporting platforms. Since then, however, there has been a dip in prices.
Turning towards bullion
Historically, the US dollar has been regarded as the safest asset class; a reliable hedge against fluctuations in other currencies and asset categories. “During the 2008 financial crisis and the pandemic, the dollar appreciated because people believed everything else would collapse, but the dollar would remain strong,” said Ali Farid Khwaja, CEO of Oxford Frontier Capital and co-founder and chairman of KTrade Securities.
Now, however, the narrative has changed. With rising geopolitical tensions, Trump’s tariffs and the recent US government shutdown, confidence in the American system is eroding. Central banks and institutional investors are turning to gold as a hedge against the dollar, driving prices higher.
The Financial Times, citing the European Central Bank, reported: “The demand for gold by central banks remained at record highs in 2024, accounting for more than 20 per cent of global demand, in contrast to around one-tenth on average in the 2010s.”
Gold now appears to be on track to supplant US Treasuries as the world’s dominant reserve asset, placing bullion once again at the heart of the global monetary system.
When the US Federal Reserve (Fed) cuts interest rates, investors tend to move funds out of money market instruments and into gold. With expectations of Fed rate cuts building and tensions between the US and China once again flaring up, gold prices continue to trend upward.
As global prices climb, the average investment Joe is following suit. In essence, what central banks are doing at scale, ordinary Pakistanis are doing instinctively: preserving value by turning to gold. But while the increase in gold prices has been turbocharged lately, its rise has been a long time coming.
“About half a century ago, I sold gold worth Rs240 per tola. In the early 1990s, unofficially, I sold hundreds of thousands of tolas of gold for Rs3,300 per tola in physical form,” recalled Qasim Shikarpuri, president of the All Pakistan Sarafa Gems and Jewellers Association and a veteran of the trade. The glitter of gold, it seems, has not tarnished over the last many decades.
Even in recent times, gold has outperformed every other asset class. “If Rs100 had been invested on July 1, 2016, it would have been worth Rs773 by August this year, compared to the second-best option, the KSE-100 Index, which would be worth Rs365. A Rs100 investment in US dollars would have yielded Rs340,” said Faysal Funds CEO Nadir Rahman, in the podcast All Things Money.
Domestic macro winds for gold
Pakistan’s macroeconomic environment also favours gold buying. “Under the International Monetary Fund (IMF) programme, there is increased scrutiny of the real estate sector,” said Khwaja of KTrade Securities. “Much of the money previously tied up in property holdings is now flowing into lockers and vaults in the form of gold.”
Imagine vaults straight out of a 1980s Bollywood film, filled with gleaming gold bars, poised for a heist by the dashing, debonair lead.
In Karachi alone, an estimated 8,000–10,000 tolas are traded every day, according to Shikarpuri, with money flowing in from various businesses as well. Traders in sectors such as rice or apparel have turned to gold because it is more profitable, especially amid tough macroeconomic conditions and limited investment opportunities.
“Never in my life have I seen gold rise by $100 a day,” said Shikarpuri, a veteran of the trade. As the US Fed slashes interest rates, gold prices are expected to rise further, drawing money away from more productive sectors and into bullion.
Add to that a cultural affinity for gold, the ease of purchase (no identification or documentation required) and its unmatched liquidity: one can simply walk into a jewellery shop, buy gold, keep it at home, and sell it whenever cash is needed. It’s no surprise there’s a growing sense of FOMO (fear of missing out) when it comes to investing in the shiny metal.
Local trading avenues
Gold in Pakistan is traded through multiple channels. For investors and jewellers, the primary sources remain the Karachi Bullion Exchange and ARY Gold, while everyday buyers typically purchase gold biscuits directly from jewellery shops at slightly higher prices.
“Technically, in Pakistan, jewellery made from new gold should not be sold in shops,” said Khwaja. “Legally, jewellers are only allowed to take gold from consumers, make jewellery out of it, and sell it back to them. Clearly, that is not the case in Pakistan, where both jewellery and bullion are openly sold.”
Trading and purchases of gold also take place on the Pakistan Mercantile Exchange (PMEX), a regulated platform that allows gold commodity trading and purchases, including millitola — a smaller denomination designed for everyday investors. On October 14, PMEX recorded its highest-ever single-day trade volume of Rs128 billion, of which Rs84.6bn was in gold and Rs24.5bn in silver — metals that generally move in the same direction.
However, Khwaja explained that while PMEX is legal, its reach remains limited. The amount of gold it can sell is capped, and demand often exceeds supply. Moreover, because it is regulated and taxed, buying through PMEX is more expensive. “It’s easier and cheaper to buy gold from jewellers, which is what the man on the street in Pakistan knows and understands. People are familiar with physical gold; asking them to buy through PMEX offers no real incentive.”
The informal gold frontier
Spot buying — what Shikarpuri calls the ‘Satta mafia’ — also takes place informally on social media platforms such as WhatsApp, though crackdowns by authorities have wiped out nearly 90pc of such activity.
Gold in Pakistan is among the cheapest in the world, said Shikarpuri. Perhaps, he explained, it’s because it is mined unofficially from Balochistan, from areas such as Saindak and Reko Diq, and has been quietly entering the market over the past three years.
At the time of the conversation, gold was underpriced by Rs10,000–12,000 per tola compared to global rates, and earlier this year, it was discounted by as much as Rs19,000.
That doesn’t mean there is less demand; in fact, quite the contrary. The lanes of Sarafa Bazaar, humming with buyers and clinking with yellow metal changing hands by the minute, are proof that in Pakistan’s uneasy economy, gold remains the only thing that does not need to shine brighter to be seen.
It always glitters.
Header: The image has been sourced from Shutterstock.
