Gold, Stocks, or Crypto: Where Should Pakistani Investors Bet?
By Aimen Siddiqui
April 3, 2025
KARACHI – As financial markets in Pakistan experience a significant surge, investors are faced with critical decisions concerning asset allocation. With gold prices reaching record highs, the Pakistan Stock Exchange (PSX) witnessing a remarkable rise, and the emergence of cryptocurrencies, the options for investment are more varied than ever.
A Bullish Market for Traditional Assets
Gold closed 2024 at Rs272,600 per tola, marking an impressive year-on-year gain of Rs52,600. Currently, gold prices have skyrocketed to Rs325,000, reflecting a remarkable 19.2% increase. This surge is largely attributed to global economic pressures and inflation, prompting many investors to consider gold as a safe haven.
Meanwhile, the PSX KSE-100 index surged by 84% in 2024, closing at 115,127 points and reaching 117,806.75 points, a gain of 2.3% in early 2025. These trends have sparked discussions among investors regarding how they can effectively diversify their portfolios.
Embracing New Investment Opportunities
In a notable shift towards modern investing trends, Pakistan has established the Pakistan Crypto Council, which aims to regulate and promote the usage of cryptocurrencies. This gesture has been positively received by market experts who view it as a prudent step towards embracing the future of finance.
Mustafa Fahim, an investment banker in the Middle East, advises that while the embrace of crypto assets is encouraging, a balanced portfolio should include all three asset classes: stocks, gold, and cryptocurrencies. “Asset allocation should depend largely on individual factors such as age, time horizon, and risk appetite,” Fahim explains, suggesting that younger investors may allocate a larger portion, around 10%, of their portfolio to crypto—given its volatility.
Recommendations from Market Analysts
Fahim emphasizes stocks, suggesting that they should constitute 60-70% of an investor’s portfolio due to their historical average annual returns of approximately 20%. He suggests index funds as a particularly stable investment choice, given that they focus on well-established corporations.
Shankar Talreja, director of research at Topline Securities, echoed these sentiments, stating that Pakistan’s equities are positioned for strong performance, particularly as the International Monetary Fund (IMF) reviews are expected to bolster investor confidence. He noted that with the current earnings multiple at 5.5x, and historical averages around 7x, there remains significant upside potential for investors.
Caution on Gold and Cryptocurrencies
Talreja advises a cautious approach to gold investments in the coming year, noting that while it has proven resilient amid global uncertainties, the current price point may not offer the same returns as seen previously.
Similarly, Muhammad Usman Siddiqui, a research analyst, describes gold as a preferred asset during economic turmoil but reiterates that the Pakistani stock market presents better opportunities for growth. Despite the nature of gold as a conservative investment, Siddiqui suggests an asset allocation strategy of 50% in gold, 40% in equities, and a minor portion in cryptocurrency for exposure.
Concerns surrounding cryptocurrencies are also prevalent among financial analysts. Although unofficial estimates suggest that around 20 million individuals in Pakistan have engaged with cryptocurrencies, potential investors are cautioned about the lack of regulation and market volatility. Fahim stated that many people utilize crypto primarily for transactions rather than long-term investments, often influenced by the desire to avoid traditional banking systems.
Barriers to Stock Market Participation
Current statistics indicate that stock market participation in Pakistan is relatively low, with only 324,952 individual accounts and 9,685 corporate accounts reported by the Central Depository Company (CDC). Analysts suggest that a combination of low financial literacy, regulatory concerns, and cultural perceptions about investing may deter average citizens from engaging with the stock market.
Fahim pointed out that misconceptions and a lack of awareness about equity investment can obstruct participation and highlighted the importance of educating potential investors to reshape these views.
Conclusion
As Pakistani investors navigate a dynamic financial ecosystem characterized by soaring gold prices, an invigorated stock market, and the rise of cryptocurrencies, diversification remains key to managing risk and capitalizing on potential returns. Experts advocate for a thoughtful blend of stocks, gold, and a limited exposure to cryptocurrencies, emphasizing the need for informed decision-making in the evolving landscape of investment options.
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