Gold-after reaching historic high in 2025- is now undergone a correction in early 2026, in both the international and Pakistani markets. This sharp overturn has raised an important question: is this the right time to invest, or does it signal caution?
Gold has historically done well in the periods of uncertainty. In 2020, during the Covid-19 pandemic and the implementation of expansionary monetary policies by most of the central banks worldwide, gold prices increased by around 25 percent.
A same trend was observed during 2024-25 when global geopolitical tensions, persistent inflation, and expectations of interest-rate changes increased gold prices up by 26 percent in 2024 and an extraordinary 66 percent in 2025. These events confirm gold’s status as a safe-haven asset, especially during times of financial market uncertainty.
In the Pakistani market, where exchange rate fluctuations and inflation augment price movements, global shocks have a tendency to create even greater volatility in the local market. In 2025, for example, 24-karat gold touched a record high of Rs486,000 per tola, with international spot prices touching USD 4,600 per ounce. The rise in gold prices is due to tariff uncertainty and strong demand from ETFs (exchange-traded funds) and central banks.
On January 31, 2026, the prices of 24-karat gold in Pakistan dived by a massive Rs25,500 per tola to Rs511,862, while international prices per ounce to around USD 4,895. Only two days later, on February 2, 2026, the downward trend persisted, with 24-karat gold tumbling by another Rs21,500 per tola to Rs490,362, and 10 grams by more than Rs18,000. Internationally, gold prices dropped by about USD 215 per ounce to USD 4,676. Recent trends indicate a correction and market volatility. According to J.P. Morgan global research forecast, the gold prices reached to average USD 5,055 per ounce by the end of 2026, rising toward USD 5,400/oz by the final quarter of 2027.
Gold prices are closely linked to monetary policy and inflation trends in the country. During periods of high inflation- driven by currency depreciation, rising energy prices, and fiscal imbalances-real interest often remain negative despite high nominal policy rates.
This situation increases the demand of gold as a store of value. During 2024-25, expectations of future interest rate cut and continued exchange rate uncertainty boosted gold demand despite a tight monetary policy stance. This highlights a very important lesson for policymakers: a tight monetary policy is not sufficient to reduce gold investment if the inflation expectations are high and the confidence in financial assets is low. In such circumstances, gold is a parallel hedge against global economic and political uncertainty and domestic macroeconomic stress.
In Pakistan, the gold demand comes primarily from jewelry and investment. Although domestic demand constitutes a small share of global consumption, it is highly sensitive to economic conditions and price fluctuations.
Gold can be purchased in the form of bullion bars, coins, collectibles, and jewelry and has traditionally served as a store of value, an inflation hedge, and a protection against currency depreciation.
For small investors, gold is a defensive savings instrument, while for larger investors it is served as a diversification and risk-hedging instrument, which reduces portfolio volatility in times of global uncertainty, with strategic profit-taking advisable once macroeconomic risks ease.
The recent crash should therefore be viewed as a correction following a strong market rally. While short-term traders may have to be cautious, but long-term investors looking for protection against inflation and market turmoil may find the current prices more favorable than those of late 2025 and early 2026.
Ultimately, the basic message remains the same gold is a hedge, not a speculative asset. It should be a part of a portfolio investment—not dominate it. In uncertain times, diversification and a long-term perspective remain the most sound and reliable investment advice.
Copyright Business Recorder, 2026
The writer is an assistant professor at the Pakistan Institute of Development Economics (PIDE) and can be reached at: hafsahina@pide.org.pk