Gold prices in Pakistan rose on Monday, with a gram costing PKR 36,788.72, up from PKR 36,442.39 on Friday. The price per tola increased to PKR 429,105.90 from PKR 425,056.80 the previous week.

The uncertainty in global trade, triggered by tariff threats between the US and China, contributed to the gold price surge. Additionally, a potential US government shutdown and geopolitical tensions, including the Russia-Ukraine conflict, have pushed investors towards gold.

Interest Rate Cuts Expected

The likelihood of interest rate cuts by the Federal Reserve in October and December is high, around 96% and 87%, respectively. This expectation supports the upward trend for gold, influenced by thinning liquidity due to a US bank holiday and a weak US Dollar.

Gold serves as a safety net during turbulent times, functioning as a store of value and a hedge against inflation. Central banks, particularly in emerging economies, continue to increase gold reserves, with purchases reaching a record high of 1,136 tonnes in 2022.

The movement of gold prices is heavily tied to the US Dollar and geopolitical factors. A weak dollar often leads to higher gold prices, while fears of recession and geopolitical instability further accentuate its demand as a safe-haven asset.

Bullish Case for Gold

Given the current market environment on October 13, 2025, the confluence of geopolitical tensions and domestic policy uncertainty creates a strong bullish case for gold. The escalating trade rhetoric between the US and China, coupled with the ongoing US government shutdown, is fueling a flight to safety. These factors are providing significant upward momentum for the precious metal.

We’ve seen this trend reinforced by persistent central bank demand, which provides a solid price floor. Looking at recent data from the World Gold Council, net purchases by central banks exceeded 500 tonnes in the first half of 2025, continuing the record-breaking pace we saw in previous years. This sustained institutional buying indicates a long-term strategic shift toward gold as a core reserve asset.

The Federal Reserve’s dovish stance is perhaps the most critical factor for traders in the immediate term. With markets pricing in a 96% probability of an interest rate cut this month, the opportunity cost of holding non-yielding gold is set to decrease significantly. This monetary easing, aimed at countering economic headwinds, will likely put downward pressure on the US Dollar and further boost gold’s appeal.

For derivative traders, this environment suggests that long positions on gold are favorable, with heightened volatility expected. Recent activity shows the Gold Volatility Index (GVZ) has climbed over 15% in the past month, sitting at levels not seen since the banking turmoil we experienced back in 2023. This suggests that strategies like buying call options could be effective, allowing traders to capitalize on upward price swings while defining their maximum risk.

Looking back, the current setup is reminiscent of the market conditions in 2019, when the Fed began cutting rates amid trade war fears. During that period, gold broke out of a multi-year range and rallied by nearly 20% in the second half of the year. The parallels between then and now suggest that we could be at the beginning of a similar sustained move higher in the coming weeks.

Create your live VT Markets account and start trading now.