ISLAMABAD: Nearly 90% of Pakistan’s gold trading takes place outside formal channels, driven by weak documentation, fragmented regulation, and opaque pricing mechanisms, the Competition Commission of Pakistan (CCP) said on Wednesday.
The CCP released its first-ever evidence-based analysis of Pakistan’s gold sector — carried out by the Commission’s Centre of Excellence in Competition Law (CECL) — examining the sector’s structure, regulatory gaps and competition challenges.
According to the report, Pakistan’s annual gold consumption stands between 60 and 90 tonnes, driven largely by cultural demand, while more than 90% of trading takes place outside formal channels.
With the market relying almost entirely on imports, Pakistan brought in $17 million worth of gold during FY 2023-24.
The report also highlighted the transformative potential of the Reko Diq copper-gold project, which is expected to generate up to US$74 billion over its 37-year useful life and significantly alter domestic supply chains.
The study identifies several entrenched bottlenecks that distort competition and undermine market functioning, including:
Informal market dominance: weak documentation and cash-based transactions allow extensive informal networks to set prices and influence supply.
Opaque price-setting: daily gold rates are largely influenced by trader associations instead of transparent market mechanisms.
Fragmented regulation: overlapping mandates of the Ministry of Commerce, Federal Board of Revenue (FBR), State Bank of Pakistan (SBP), Pakistan Gems and Jewellery Development Company (PGJDC) and the Trade Development Authority of Pakistan (TDAP) result in policy inconsistencies and enforcement gaps.
High taxes and compliance costs: complex procedures and inconsistent taxation encourage smuggling and under-invoicing.
Limited refining, assaying and hallmarking capacity: with negligible refining capability and inadequate hallmarking facilities, purity issues persist and consumer protection remains weak.
Data deficiencies: the absence of reliable figures on imports, trader registration, sales and purity restricts evidence-based policymaking.
To address these gaps, the CCP has recommended the establishment of a unified Pakistan Gold and Gemstone Authority to harmonise rules, licensing, imports and compliance with Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) regimes.
The Commission has also proposed mandatory nationwide assaying and hallmarking to ensure purity standards, strengthen consumer protection and support exports.
Further reforms proposed include digital transformation of the gold value chain through blockchain-based traceability linked with FBR’s Track and Trace System, the creation of a Gold Banking System inspired by Turkiye’s model to channel household gold into the formal sector, and strengthened data governance with centralised reporting, documentation and scientific price-monitoring.
The CCP noted that modernising the gold sector would enhance transparency, curb illicit trade, protect consumers and unlock significant economic value — particularly as Pakistan prepares for the commercial rollout of Reko Diq.