Gold, oil and the Pakistani saver

Gold is about 25% below its January record and has more than doubled over the last three years. Both are true at once, and the gap between them is the most useful thing a saver can hold on to.

Where the price actually is

Internationally, gold traded near $4,180 an ounce this week, or about Rs432,000 per tola in Pakistan against Rs572,862 at the January peak.

The year behind that matters more. Gold began 2026 near $4,330, ran hard through January on the Iran conflict and a weak dollar, and set an all time high of $5,589 dollars on January 28. It has ground lower since. The fall from the peak is about 25% in dollars and 24% in rupees, which leaves gold roughly flat on twelve months ago and more than double where it stood three years back.

Why it fell

The honest explanation is boring. It is bond yields. The US ten-year Treasury yield rose above 5.35% on October 7, its highest since 2002.

Gold pays you nothing. No coupon, no dividend. So when safe government bonds pay more than inflation, holding gold costs you something real. The Federal Reserve turned hawkish instead of cutting, and rate cuts kept getting pushed back. The US labour market has since begun to soften, which is the one thing that could change that.

The backdrop was about as supportive for gold as it gets, with a war in the Middle East and Brent up close to 70% over twelve months. Gold still fell, because the yield on the alternative rose faster.

The argument that oil will now pull gold higher

A competing case is gaining ground, and some analysts read the last three months as oil and gold moving together rather than apart. The supply picture behind it is not in doubt. Tanker traffic through Hormuz has fallen to a two month low, and the squeeze is in refined product rather than crude. European gasoil has traded at a record premium of close to $95 a barrel over Brent, against a refining margin that in normal times sits nearer $20, and US diesel is above $6 a gallon. That is a shortage of the fuel economies actually run on, not a shortage of barrels.

How much of this is politics is clear from the price. WTI fell to about $88 during the UN General Assembly, when flows through Hormuz eased and looked close to normal, then recovered into the mid 90s within days once talks did not follow. Brent has held above $100. The argument built on all this is that dearer fuel raises costs across the economy, slows activity, widens the US deficit and eventually forces the authorities to expand the money supply. On that view the dollar is the thing at risk, and gold rises alongside oil rather than falling because of it.

I would hold that loosely rather than reject it. Pakistan feels this squeeze directly through the import bill. But the case rests on a long chain of events, and three months is a short run of evidence. If it plays out, gold at these levels looks cheap. If it does not, gold stays under pressure. Others read the same facts the other way, arguing that dearer energy pushes the Federal Reserve further from cutting and is therefore a headwind for gold rather than a support. A saver who needs to know which before acting has set an impossible test.

What it looks like from here

In some past years the rupee cushioned the fall. Not this time. The rupee has been steady near Rs278, so savers here have felt the full international move.

Meanwhile, the thing gold is bought to protect against has not gone away. Inflation was 10.3% in September and the State Bank has held the policy rate at 11.5% since June.

The IMF does not expect that pressure to fade. Its latest World Economic Outlook puts Pakistan inflation at 7.1% for 2026 and sees it rising to 9.9% in 2027. The direction matters more than the decimal.

So the picture for an ordinary saver is uncomfortable. Cash barely clears inflation before tax. Gold has fallen hard over nine months but has more than doubled over three years. Neither is a safe and obvious answer.

The question worth asking

The people who got hurt this year bought in a single lump near a dramatic high. The people who were fine were putting a little aside every month.

That is arithmetic, not insight. Buying a fixed amount regularly means you buy less when prices are high and more when they are low. A 25% fall is frightening if you hold one large position, and an ordinary stretch if you are nine months into a ten year habit.

So the honest answer to whether this is the moment to buy gold is that it is the wrong question. The better one is whether you have a way of saving that does not require an answer.

The article does not necessarily reflect the opinion of Business Recorder or its owners.