Key Points
- Gold hit record highs above Rs 450,000 per tola before a sharp Rs 14,000 plunge.
- Surge driven by heavy central-bank buying, led by China and Turkey.
- Global correction followed stronger U.S. data and delayed rate cuts.
- Gold remains a safe-haven asset, but volatility persists.
ISLAMABAD: For centuries, civilisations have turned to gold when paper promises failed — from the Pharaohs’ vaults to the Fort Knox reserves. But even the metal that has outlasted empires can falter under today’s economic tides.
After touching record highs above Rs 450,000 per tola in Pakistan, gold prices have plunged, mirroring a global correction that has caught investors off guard and revived questions about what really drives the world’s oldest haven.
The flight to safety — and the frenzy that followed
For much of 2024 and the first half of 2025, gold glittered brighter than ever. As inflation fears lingered, central banks slowed interest-rate hikes to start rate-cutting, and geopolitical flashpoints deepened from Ukraine to the Middle East, investors turned to bullion as a hedge against volatility.
According to the World Gold Council, central banks collectively added more than 1,000 tonnes to their reserves last year — the second-largest annual increase on record — led by China, Turkey, and India. The buying spree tightened supplies, fueling speculative momentum across markets, propelling international prices beyond $4,000 per ounce by early October.
In Pakistan, where local prices track both international rates and the rupee-dollar parity, the rally pushed 24-karat gold above Rs 450,000 per tola, a historic peak that left even seasoned traders astonished.
Central banks and the China effect
Behind the surge was a quiet but decisive shift in global monetary behaviour. China’s central bank had been steadily accumulating gold for 17 consecutive months, diversifying away from dollar-denominated assets amid rising tensions with the United States. Similar moves by Russia, Turkey, and several Gulf states reinforced a perception that gold was regaining its place as a strategic reserve asset in a fragmenting global financial system.
Analysts at J.P. Morgan noted that this “monetary de-dollarisation” wave, coupled with softer US yields and uncertainty around future Federal Reserve policy, amplified demand for bullion as both a hedge and a statement.
From euphoria to correction
But what rises fast rarely stays there for long. As expectations shifted toward a delayed US rate-cut cycle and stronger-than-expected US GDP data lifted the dollar, investors began to unwind their heavy gold positions. The correction was swift.
In global markets, spot gold fell nearly $100 per ounce within days, and in Pakistan, the local rate tumbled Rs 14,000 per tola on Tuesday alone, one of the steepest single-day declines of the year.
Bullion dealers said the sell-off reflected “profit-taking after panic buying,” describing it as a healthy adjustment rather than a collapse. “When gold climbs too far too fast, a correction is inevitable,” an Islamabad-based trader told WE News.
A mirror of the global mood
The reversal underscored how tightly local markets remain linked to global sentiment. Every fluctuation in the dollar, US Treasury yields, or central-bank tone reverberates across bullion counters in Karachi, Mumbai, and Dubai.
Economists say that while gold’s long-term appeal as a hedge remains intact, short-term swings have grown sharper due to speculative trading and algorithmic flows reacting instantly to macroeconomic data.
History’s oldest refuge, not a flawless one
Throughout history, from the Great Depression to the 2008 financial crisis, gold has served as a refuge for traders in uncertain times. Still, even the oldest safe-haven carries risk. Unlike bonds or equities, gold generates no yield, and when rates rise or inflation eases, its shine can fade quickly.
Still, for central banks and households in emerging markets, its symbolic and strategic value endures. “Gold represents trust when paper assets lose it,” says economist Ahsan Mehanti, noting that Asian and Middle Eastern buyers tend to return to bullion whenever currencies wobble.
The road ahead
Market watchers believe gold may stabilise once the US monetary direction becomes clearer. The World Gold Council expects continued central-bank interest, even at a slower pace than 2024’s record accumulation. If global inflation cools and growth steadies, the metal could consolidate rather than soar — but few expect it to lose its ancient role as financial ballast.
After all, every time uncertainty looms, humanity’s oldest currency still beckons with a familiar gleam.
