How the grey market and cross-border smuggling dictate the actual physical supply of gold in Pakistan's bazaars.
The Import Ban Effect
When the government restricts luxury imports to preserve dollar reserves, legal gold imports grind to a halt. However, demand for weddings and investments never stops. This dynamic creates a thriving grey market.
The Dubai Connection
A significant portion of physical gold circulating in Pakistan arrives via informal channels from Dubai. When border controls tighten, the supply of physical gold shrinks, leading to a "shortage premium" where physical gold trades higher than the official interbank-derived rate.
What it Means for the Buyer
During times of severe import restrictions, you may find that jewelers refuse to sell 24K bars at the official association rate, demanding a "premium" or "on" price. Always check multiple dealers to find the true clearing price of the market.