In the international gold market it is for the first time that the price of gold has recorded an unprecedented high of $904.5/ounce. This has directly resulted in a parallel increase in the Pakistani gold market. The price of 10-gram of gold has reached a record Rs17,828. In the running year so far an increase of more than Rs4,500 has been recorded.
Since October 20, 2007 there is a constant increase in the prices at the international gold market and this trend seems to be continuing.
According to experts prior to October 20, last year a stability of some sort was observed in the price of gold but after October 20 the prices have seen an unprecedented spiral.
In the first half of the last fiscal year (July-December) an increase of Rs3,292/10-gram of gold was recorded. On July 1, 2007, 10-gram gold was available at Rs12,908 in the domestic market. By the end of September the price reached Rs14,314 with an increase of Rs1,406. The gold price increased to Rs16,200 by the end of December.
The increase in the gold price has continued in the current year. In the first fortnight of the running month an increase of more than Rs1,500 was recorded in gold prices per 10 grams, whereas in the last two-and-a-half months an increase of Rs5,000 was witnessed. Gold prices reached an unprecedented Rs20,900/10-gram at one stage.
In the international gold market an increase of $173.5 per ounce was witnessed in the last six months.
Experts cite devaluation of dollar in comparison to the international currencies, increasing crude oil prices in the international market, the threat to the American economy and the inflation at the international level as the reasons for the unprecedented increase in gold prices. This price spiral at the international level has hit the domestic scene as well.
After the record increase in gold prices at the international market, gold imports have almost seized. Some of the experts are of the view that the way the circumstances have worsened 9/11 onwards at the international political and trade scene many of the oil producing countries are preferring gold trade over dollar.
Experts are of the opinion that investors are feeling it safer to invest in gold as compared to dollar that is devaluing.
On the other hand China, Japan and Russia are busy in strong buying. Germany and Arab countries can also be seen involved in partial selling of gold.
According to experts due to the increase in price of gold, Pakistani and Indian markets have lost their purchasing power. In addition to this a marked decrease in imports is also witnessed.

According to statistics the commodity market imported 325kg of gold during July-October 2007 whereas during the period July-October 2006 4,641kg of gold was imported.
According to statistics obtained from jewellers, during the year 2005, 30 lac tolas of gold was imported in the country, whereas its imports shrunk to a meagre 3 lac tolas in the year 2006.

According to gold importers during the year 2005 the then prime minister Shaukat Aziz, former federal minister for trade Humayun Akhtar Khan and Chairman Federal Board of Revenue Abdullah Yusuf played a significant role in increasing gold imports as at that time, on the import of one tola gold a duty of one dollar and an income tax of Rs2 was charged. By the end of the year 2005 the duty per tola was set as 50 cents and in addition to this one per cent withholding tax is levied on the import of gold.
This adversely affected the import of gold. This also gave to illegal smuggling of gold from Dubai and other countries. As a result, gold imports which were recorded at 30 lac tolas in 2005 decreased to 3 lac tolas in 2006.
Due to the unprecedented surge in the price of gold, the business of jewellers got badly affected. Due to the increase in gold prices the jewellery shops in the city were seen deserted. On the other hand an increase in the number of buyers at the shops of artificial jewellery was recorded.

Regarding the price spiral, most of the buyers are of the view that this increase in gold prices is unprecedented for them. Many have stopped buying gold as for them it is beyond their purchasing power.
Jewellers are of the view that the government must announce a special package to bail them out of the present situation. The present situation is costing in billion in terms of losses to those allied with the business.

In this regard, President All Sindh Sarafa and Jewellers Association Al-Hajj Haroon Rashid Chand maintained that the increase in prices of gold in the international market had not just affected the gold imports but had also affected the jewellery business. He said there was a downfall in business in terms of quality as well as quantity. The association head said in comparison to last year there was 93 per cent decrease in gold imports.
According to experts if gold imports are allowed from Bangladesh, India, Iran and some other neighbouring countries, then it will help in keeping the local market flourishing.