Why Pakistan’s Gold Prices and PSX Are Hitting Historic Highs in 2025

Pakistan’s economy is making headlines as gold prices surge to record highs, while the KSE-100 Index of the Pakistan Stock Exchange (PSX) crosses the historic 157,000 mark for the first time ever. For investors and ordinary citizens alike, these developments carry deep significance. Rising stock market levels indicate growing investor confidence, whereas the skyrocketing gold prices reflect ongoing concerns about inflation, currency depreciation and global uncertainty.

Current Gold Prices in Pakistan (as of 10 September 2025)

• 24K Gold: Rs. 383,800 per tola
• 22K Gold: Rs. 351,810 per tola

Historical Context

Gold and stock markets have always had an interesting relationship in Pakistan. Historically, gold has acted as a “safe haven asset,” attracting investors whenever inflation, political instability, or global uncertainty rises. In contrast, the stock market reflects confidence in businesses, corporate earnings, and the overall economy.

• In 2018–2019, when the rupee faced steep devaluation, gold prices rose sharply as families, traders, and investors turned to it as a hedge against inflation.
• On the other hand, during 2020–2021, despite COVID-19 disruptions, the stock market rebounded strongly with the KSE-100 Index regaining momentum on the back of improved liquidity and foreign inflows.

Now in 2025, the parallel rise of both gold and stocks is unusual but not unprecedented. It reflects a complex mix of optimism and caution in Pakistan’s financial landscape.

Why Gold Prices Are Rising

The surge in gold prices is not only a Pakistani phenomenon but also a global trend. However, certain local factors have amplified its rise in Pakistan:

1. Rupee Depreciation – When the rupee weakens against the US dollar, the local price of gold rises sharply since it is traded internationally in dollars.
2. Inflation Concerns – With food and energy prices high, households and investors alike see gold as a store of value.
3. Global Uncertainty – Wars, geopolitical tensions, and volatility in oil prices have pushed global investors into safe haven assets like gold.
4. Local Demand – Pakistan’s strong cultural attachment to gold for weddings and savings continues to support demand even during economic hardship.

Thus, gold’s record highs are less about prosperity and more about fear and protection.

Why the Stock Market Is Rallying

In contrast, the stock market’s record-breaking rally is driven by optimism. The KSE-100 Index crossing 157,000 points reflects investor confidence in several key areas:

1. Improved Economic Stability – After difficult years of fiscal tightening, Pakistan’s macroeconomic indicators show signs of recovery, supported by the IMF program and higher remittances.
2. Corporate Earnings – Many listed companies, particularly in the banking, energy, and cement sectors, are posting strong profits.
3. Foreign Investor Interest – A more stable rupee and reforms in capital markets are attracting foreign institutional investors.
4. Liquidity in the Market – Local investors, including mutual funds and high-net-worth individuals, are re-entering the market, fueling momentum.

This rally reflects confidence in growth opportunities, even though ordinary citizens may not feel immediate benefits.

Impact on the Economy

The dual record highs of gold and stocks have mixed implications:

• Positive for Capital Markets: A strong stock market attracts foreign investment, improves company valuations, and supports job creation in the long run.
• Challenging for Households: Rising gold prices mean higher costs for weddings, jewelry, and savings. For the middle class, this is a financial burden.
• Mixed Signal for Policymakers: While the stock rally is good news for economic confidence, the surge in gold highlights persistent inflationary pressures.

Impact of Floods

Another important factor shaping the economic outlook is the recent floods in Pakistan. Floods have historically caused massive agricultural and infrastructure damage, and 2025 is no exception.

• Food Inflation: Estimates indicate that over 30% of major crops in Sindh, Punjab & KPK were destroyed, likely pushing food prices higher by 10–15%, further fueling inflation. This strengthens the demand for gold as a hedge against rising costs.
• Government Spending: Relief and reconstruction efforts are projected to cost PKR 200–300 billion, widening the fiscal deficit and pressuring the rupee. A weaker rupee makes gold even more expensive locally.
• Stock Market Sectors: While floods negatively affect banks, agriculture-related businesses, and rural demand, sectors like cement, steel, and construction materials may benefit from increased demand during the rebuilding phase.
• Investor Sentiment: Natural disasters create uncertainty. Conservative investors often shift towards gold for safety, while opportunistic investors selectively target stocks in sectors likely to gain from reconstruction.

Investor Psychology Fear vs. Confidence

The simultaneous rise in gold and stocks can be understood through investor psychology:

• Gold Buyers: Represent those seeking safety, fearing inflation, rupee depreciation, or political instability.
• Stock Buyers: Represent those willing to take risks, betting on corporate growth, reforms, and a brighter economic future.

This split behavior shows that Pakistan’s economy is still at a crossroads: optimism about reforms coexists with caution about inflation and uncertainty.

Global and Regional Comparison

Pakistan is not alone in these trends:

• In India, stock markets have also seen record highs, supported by strong corporate earnings and foreign inflows. At the same time, gold remains a critical investment for Indian households.
• Globally, US markets remain strong, but investors still allocate to gold due to inflation fears and geopolitical risks.
• Compared to regional peers, Pakistan’s rally is particularly striking given the smaller base of retail investors: less than 0.2% of the population participates in the stock market, compared to more than 7% in India.

This means Pakistan’s growth potential in capital markets is enormous if more citizens are encouraged to participate.

Future Outlook

The big question is whether these record highs are sustainable:

• Gold Outlook: Analysts suggest gold may remain high as long as inflation persists and geopolitical tensions remain unresolved. However, if the rupee strengthens and inflation eases, gold prices could stabilize.
• Stock Market Outlook: The PSX rally could continue if reforms remain on track, corporate earnings grow, and political stability improves. However, risks include fiscal slippages, high debt repayments, and external shocks.

In short, gold’s rise reflects caution, while the stock market’s rise reflects hope.

Balanced Advice for Investors

For investors in Pakistan, the message is clear:

• Diversification is Key: Relying solely on gold or stocks is risky. A balanced portfolio is essential. Consider mixing mutual funds, gold, and select stocks.
• Short Term vs. Long Term: Gold may protect wealth in the short term, but stocks historically deliver better returns over the long run. For small investors, low-cost index funds or ETFs can reduce risk.
• Stay Informed: Monitor economic reforms, currency movements, global developments, and sector-specific news in Pakistan before making decisions.

Practical Tips:

•         If buying gold, consider small quantities periodically rather than large one-time purchases.
•         For stock investments, focus on stable sectors like banking, energy, and consumer goods, which historically withstand economic shocks.
•         Track government policies, flood recovery programs, and IMF reforms that may influence market movements.

Conclusion

The record highs in both gold and the Pakistan Stock Market represent a tale of two mindsets: fear and confidence. While rising gold prices show that people are still seeking protection against inflation and uncertainty, the stock market rally demonstrates that optimism about Pakistan’s future is very much alive.

For the economy, these parallel trends send a mixed but powerful message, Pakistan is in transition. With the right policies, the country can convert investor optimism into sustainable growth. For ordinary citizens and investors, the lesson is clear, remain cautious, stay diversified, and prepare for both risks and opportunities ahead.

As Pakistan’s financial markets evolve, Azee Securities remains committed to guiding investors with knowledge, transparency, and the right tools, empowering them to navigate uncertainty and seize opportunity in equal measure.