KARACHI: The Pakistan Mercantile Exchange (PMEX) is planning to introduce the trading of physical gold on its platform in a nationwide bid to “document” and “regularise” the selling and buying of the precious metal at the retail level.

Speaking to Dawn in an interview, PMEX Managing Director Ejaz Ali Shah said the country’s only futures exchange is “talking very aggressively” with the government to set up an official gold market on its platform.

Pakistan doesn’t import gold officially on the longstanding pretext of a dollar shortage. A handout released by the Senate of Pakistan quoted Salman Hanif, chairman of the Gem and Jewellery Association, as telling a sub-committee of the Standing Committee on Commerce that gold’s annual consumption hovers between “150 to 200 tonnes” in Pakistan despite a ban on its imports.

In other words, gold is mainly smuggled into the country to meet fresh demand that can’t be fulfilled by reusing the existing jewellery and gold bars.

“Gold is actually an international currency. So when you buy gold, you also get a dollar hedge… yet the gold market at present is completely unorganised,” he said, adding that all gold should ideally be imported by the PMEX.

Subsequently, jewellers and retailers should access gold supplies from the platform of the exchange, said Mr Shah.

In addition to the government, the PMEX is currently in talks with the Pakistan Gems, Jewellery Traders and Exporters Association, Securities and Exchange Commission of Pakistan and the State Bank of Pakistan for the creation of an official gold market on the PMEX.

The futures exchange has also devised a mechanism for the deposit and withdrawal of physical gold for the retail segment to better manage the country’s “strategic asset”.

The PMEX CEO said progress on the initiative has slowed down in recent months because of the change in government.

“Gold exists in huge quantities in Pakistan. If we organise this asset, we can gain great financial strength at the international level. Having large gold reserves means we should get more favourable terms while borrowing dollars from the rest of the world. We can issue gold-backed bonds,” he said.

Published in Dawn, July 29th, 2023