Gold Suddenly falls in Pakistan

Pakistanis have long found gold to be a reliable means of preserving their savings. There are three legitimate methods for purchasing or investing in gold within the country. Those seeking to sidestep the expenses and hazards associated with owning physical gold have three options: digital gold, regulated gold mutual funds, and gold futures.

Physical gold can be purchased at a local jeweler or bullion dealer, who provides the investor with direct ownership of the metal in the form of bars, coins, or jewelry. However, this form of gold investment comes with its own set of challenges, including security concerns, storage costs, purity issues, and resale deductions. These factors can eat into the actual return an investor receives, especially when buying jewelry, where making charges can reach up to 35 percent of the gold’s value.

Selling physical gold may also result in a reduced value due to various deductions applied at the time of purchase and resale. For those looking to avoid these costs, digital gold, regulated gold mutual funds, and gold futures offered at the Pakistan Mercantile Exchange (PMEX) present viable alternatives.

Digital gold can be bought through platforms like Asasa, which allows investors to accumulate 24K gold digitally starting from just Rs. 1,000. The investment is backed by an equivalent amount of physical gold held in secure custody. Asasa is registered with the Securities and Exchange Commission of Pakistan (SECP) and offers PMEX-linked digital gold products such as milliSona.

Another regulated option is investing in gold mutual funds, which provide exposure to gold without the need to hold or store physical gold. Funds like the Meezan Gold Fund and the NBP Islamic Gold Fund invest in PMEX-deliverable gold contracts and can be accessed with a minimum initial investment of Rs. 5,000 and Rs. 10,000, respectively.

These funds offer convenience as investors do not have to manage their own storage or security, but they still require careful consideration of fees, structure, risks, and investment strategies.

For more seasoned investors, trading gold futures on the PMEX presents an additional avenue. PMEX-registered brokers facilitate access to this commodity futures exchange, which offers various gold contracts, including smaller-sized ones for investors with lower capital. However, gold futures trading is riskier due to the use of margins, which can lead to significant gains or losses.

Therefore, this option is more suitable for those familiar with futures trading and capable of managing the associated risks. Ultimately, before investing, it is crucial to understand what exactly you are buying and who regulates it. Investors should also be aware of associated fees, custody arrangements, redemption processes, and potential risks.