Bull out of bullion: Pakistan’s gold market is in disarray

Under the scanner of authorities, Pakistan’s gold market – seen largely as an unregulated, untaxed sector of the economy – is now seeing massive disruption as traders have not only stopped issuing rates, but also say activity is hindered due to lack of buyers and non-availability of cash to run day-to-day operations.

The bullion market recently came under the radar as authorities pursued a crackdown against smuggling and tax evasion. The action was triggered as the rupee saw a phenomenal fall in open-market trading, prompting gold traders to start selling the precious metal near a record high at the end of August.

The caretaker government then also constituted a task force consisting of law enforcement and intelligence agencies for decisive action against the “gold mafia” and smuggling of precious metals. Simultaneously, a crackdown and some administrative measures in the currency market also caused the rupee to appreciate substantially, resulting in the rupee becoming the best-performing currency in the world during September 2023.

With watchful eyes closely following developments, traders and gold business owners are now left ruing lack of activity.

“Three out of every four people who enter my shop (in a day) are here to sell,” said Mohammad Khurram, who has a jewellry shop in one of the busier markets at Karachi’s Tariq Road.

“I can’t even buy jewellry worth Rs50,000 because I don’t have any cash. There’s no cash in the market either.”

Two other jewellers Business Recorder reached out to also said majority of the customers are “not looking to buy”.

“The market is virtually at a standstill since people, who have seen gold rise to around Rs240,000 per tola, don’t want to sell below Rs200,000. Buyers, on the other hand, are holding off on a purchase because they expect the gold price to further fall,” said a trader, requesting anonymity.

Another merchant Abdul Karim said the business has been on the decline for a number of months as runaway inflation squeezed the pockets of buyers, while high costs forced several to sell their gold holdings.

Taking the bull out of bullion

Haroon Chand, President of the All-Pakistan Sarafa Gems and Jewellers Association (APSGJA), said the gold market is struggling amid low sales.

“People are selling small items because they have already sold big ticket ones. They tell us that they were selling to pay school fees or medical bills,” he said, diverting the conversation away from the crackdown on traders.

Gold rates on the bullion market have not been issued since September 13 as the government looks to regulate and streamline the market.

Chand, however, praised the government for its crackdown in Peshawar and Quetta.

Another trader, who requested anonymity, said gold rates are currently being decided at an individual level, and not following an official association rate.

“Even if you do get the rates, you might still not get the gold bar. The rates are just being used to benchmark other gold-related items,” he said.