Gold prices in Pakistan fell on Wednesday. The price was 40,245.19 Pakistani Rupees (PKR) per gram, down from 40,487.64 PKR the day before. The cost per tola also dropped to PKR 469,412.00 from PKR 472,239.90. FXStreet adjusts international prices to reflect local currency and units, updating them daily. However, local market prices can vary slightly from these references.

Gold as a Hedge Against Inflation

Gold is often seen as a safe investment and a way to protect against inflation and currency loss. Central banks hold a lot of Gold, with 1,136 tonnes added to global reserves in 2022, making it the largest yearly purchase ever. Gold prices tend to move opposite to the US Dollar and Treasuries. A weaker Dollar can lead to higher Gold prices, especially when interest rates are low. Economic issues like geopolitical unrest or fears of recession can quickly change Gold’s value, as it is viewed as a safe choice. Factors like geopolitics and interest rates, especially concerning the US Dollar, greatly impact Gold prices. A strong Dollar generally keeps Gold prices down, while a weak Dollar can push them up. Currently, we are experiencing a small drop in gold prices, which seems to be a temporary fluctuation rather than a long-term trend. The main influence on Gold in the coming weeks is the outlook for U.S. interest rates. According to the CME FedWatch Tool, traders see over a 70% chance of a Federal Reserve rate cut by the second quarter, which could weaken the Dollar and boost Gold.

Inflation and Gold Sensitivity

In 2025, persistent inflation concerns kept Gold appealing as a safe investment, even though the U.S. headline CPI averaged 3.1% for the year. This suggests that any signs of economic instability could quickly increase Gold demand. For traders, this means Gold is highly sensitive to political news and fears of recession. A major factor supporting Gold is the ongoing purchasing by central banks, which surged remarkably after record purchases in 2022 and 2023. Data from the World Gold Council shows that strong buying from official sectors continued into 2025, led by emerging market banks. This steady demand creates a solid price floor, reducing the immediate risk of price drops. Gold’s opposite relationship with riskier assets is also essential now, particularly after the S&P 500’s strong performance through the end of 2025. With stock markets near their all-time highs, Gold offers a relatively undervalued hedge against potential downturns in equities. Weakness in stock prices can signal strength in Gold. Given these factors, derivative traders should see current price levels as a good chance to take bullish positions. Using long-term call options, ideally expiring in the second or third quarter, could effectively leverage anticipated rate cuts. This method allows traders to benefit from a weaker Dollar while managing risk. Create your live VT Markets account and start trading now.

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