The notable rise in gold prices over the past two years is no longer just a financial headline; has become a powerful indicator of how deeply uncertainty has penetrated the global and domestic economic situation.
On the international stock markets and in the local bazaars of Pakistan, gold has once again regained its historical role as a safe haven asset par excellence. In early 2026, international bullion prices crossed the symbolic threshold of $5,000 per ounce, compared to nearly $2,300 in 2023, reflecting an increase of more than 120% in less than three years.
In 2025 alone, gold posted a windfall gain of around 64%, the strongest annual rise since the late 1970s. This rally has continued into 2026, as investors, central banks and households exit risky assets and seek protection from geopolitical turmoil, monetary uncertainty and economic fragility.
What makes this episode particularly significant is that gold’s rise is not driven by a single crisis, but by a convergence of global disruptions that have altered investor psychology. Wars and geopolitical tensions remain fundamental. The protracted conflict between Russia and Ukraine continues to disrupt energy markets and global supply chains, while instability in the Middle East has revived concerns about oil routes, regional security and the risks of broader escalation.
Strategic rivalry between major powers has intensified, weakening diplomatic cooperation and increasing military spending around the world. Each of these events injects uncertainty into the markets. Historically, when geopolitical risks increase, capital shifts away from stocks and currencies toward assets that preserve purchasing power, and gold becomes the primary beneficiary of that shift.
At the same time, the global economy is undergoing a period of structural stress. Growth in advanced economies has slowed, debt levels have increased, and financial systems remain sensitive to shocks. Although inflation has moderated in some regions, it remains persistent due to the fragmentation of supply chains, climate-related disruptions to food and energy production, and the economic costs of geopolitical realignments.
Central banks therefore face a complex policy dilemma: tightening policy too much risks a recession, while easing too quickly can reignite inflation. Markets increasingly expect interest rate cuts in the United States and Europe, and when interest rates fall, the opportunity cost of holding unprofitable assets like gold decreases. As bond yields weaken and currencies fluctuate, gold becomes relatively more attractive, bolstering demand from institutional and retail investors.
Another powerful factor behind gold’s rise is the changing behavior of central banks themselves. Over the past three years, central banks have become some of the largest buyers of gold in the world. Global purchases by central banks have exceeded 1,000 tons annually, which represents the largest accumulation in decades.
This shift reflects deeper strategic concerns about overreliance on the US dollar, exposure to sanctions, and geopolitical fragmentation of the international financial system. Emerging economies in particular are diversifying their reserves to reduce vulnerability to external shocks. As official demand rises alongside private investment through gold-backed exchange-traded funds, the global balance between supply and demand tightens, putting sustained upward pressure on prices.
Trade disruptions and economic nationalism have also reshaped investor expectations. The global trading system is no longer governed solely by efficiency and openness. Tariff disputes, industrial policy interventions, strategic decoupling and reshoring initiatives are redefining the way countries interact economically. These changes weaken confidence in long-term global growth. Investors now perceive uncertainty as structural and not temporary.
In such an environment, gold becomes more than just a hedge against the crisis; it becomes insurance against systemic instability. Therefore, the metal’s rally does not reflect optimism, but rather caution about the durability of the existing global economic order.
These global forces are transmitted directly to Pakistan’s gold market, often with magnified intensity. Pakistan is largely a recipient of bullion prices, importing global price movements into its domestic economy. When international gold prices rise, local rates adjust almost instantly. However, Pakistan’s own macroeconomic vulnerabilities amplify the impact. In recent months, gold prices in Pakistan have crossed unprecedented thresholds. A tola of 24-carat gold has crossed Rs 500,000, compared to around Rs 180,000 in 2022 and about Rs 300,000 in early 2024. In simple terms, gold prices have almost tripled in three years, transforming what was once a common household asset into an increasingly expensive investment.
Currency depreciation also plays a crucial role in this transmission mechanism. Since gold is priced globally in US dollars, any weakening of the Pakistani rupee immediately raises its local cost. Pakistan’s rupee has remained under pressure due to external debt servicing, trade deficits, limited foreign exchange reserves and dependence on external financing. Even as global gold prices take a temporary pause, the volatility of the rupee ensures that domestic prices continue to rise. Pakistani consumers are therefore experiencing a double shock: global price increases combined with a fragile local currency.
The implications extend beyond the bullion market itself. Rising gold prices influence savings behavior, portfolio allocation, and even inflation expectations. If households increasingly deposit their wealth in gold rather than in productive sectors such as business investment, manufacturing or capital markets, long-term growth may weaken.
Capital that could finance innovation and employment is trapped in idle assets. At the same time, higher gold prices can encourage speculative trading, informal hoarding, and distortions in household financial planning. Authorities therefore face the challenge of restoring confidence in financial stability so that gold demand reflects choice and not fear.
There are also implications for Pakistan’s external sector. Higher gold prices increase the value of imports, which could widen the trade deficit if demand remains strong. At a time when Pakistan is already managing external financing constraints, any additional pressure on the balance of payments is costly. Furthermore, gold price volatility can feed into expectations about monetary stability, influencing broader perceptions of economic health.
Looking ahead, gold’s trajectory will depend on both global and domestic developments. Internationally, if geopolitical tensions persist, trade fragmentation deepens and monetary policy remains uncertain, gold is likely to remain elevated. Some global forecasts already suggest that prices could reach $6,000 per ounce if conflicts widen or financial conditions deteriorate further. Domestically, any further depreciation of the rupee, resurgence of inflation or weakening growth prospects would translate these global pressures into even higher local prices in Pakistan.
However, the rise in gold should also be interpreted as a warning sign. It reflects a world where investors prioritize security over productivity, protection over expansion. For Pakistan, the shine of rising gold prices masks deeper structural challenges related to monetary stability, inflation management, export competitiveness and investor confidence. Gold may shine brightly in the markets, but its shine reflects caution rather than comfort.
Ultimately, rising gold prices tell a larger story about the global economy and Pakistan’s place within it. It is a story marked by geopolitical friction, fragile growth, nervous investors and households seeking stability in times of uncertainty.
In Pakistan, the rising value of gold symbolizes both protection and pressure, protection for savers, pressure for both consumers and policymakers. Until global tensions ease and domestic fundamentals strengthen, gold will remain not just a commodity but a mirror of the risks shaping international finance and Pakistan’s economic future.
The author is affiliated with the Sustainable Development Policy Institute (SDPI), Islamabad and has a PhD in Applied Economics. He can be contacted at: [email protected]. The opinions expressed are exclusively their own and do not necessarily reflect the position of the institute.
Disclaimer: The views expressed in this article are those of the writer and do not necessarily reflect the editorial policy of PakGazette.tv.
Originally published in The News
