Pakistan's Gold Sector

The Competition Commission of Pakistan (CCP) has published its maiden Competition Assessment Study of the Gold Market in Pakistan, providing the first evidence-based analysis of the sector's structure, regulatory landscape and competitiveness challenges. The study emphasizes that modernizing the gold sector will boost transparency, safeguard consumers, reduce illicit trade and unlock significant economic value, particularly as Pakistan prepares for the commercial rollout of the Reko Diq project whose transformative potential is expected to generate up to $74 billion over its useful life of 37 years and significantly reshape domestic supply chains.

Key highlights from the report

a. Pakistan's Gold Reserves

Pakistan's gold reserves, held by the State Bank of Pakistan (SBP), have shown a steady increase, reaching USD5.854 billion in January 2025, up from USD5.434 billion in December 2024.

Monthly data from December 1956 to January 2025 highlights an average reserve of USD687.864 million, with the current reserves marking an all-time high.

In terms of volume, gold reserves stood at 64.75 tonnes in the first quarter of 2025, slightly up from 64.74 tonnes in the previous quarter.

Historically, reserves have averaged 64.82 tonnes since 2000, peaking at 65.43 tonnes in Q4 2007 and hitting a low of 64.39 tonnes in Q1 2010.

Pakistan relies heavily on gold sourced from the UAE and Switzerland, alongside informal channels like smuggling.

b. The Reko Diq Mine

· The Reko Diq mine in Balochistan has gold and copper reserves of around $60 billion, with $54 billion of gold and $6 billion of copper at the current market prices.

· Discovered in the 1990s, the project's development stalled due to a decade-long international dispute after Pakistan revoked mining licenses in 2011.

· Under the 2022 settlement with Barrick Gold Corporation — the majority stakeholder in the Reko Diq project — controls 50% of the deposits.

o The remaining 50% is shared between Pakistan's federal government entities (25%) and the provincial government of Balochistan (25%).

o Notably, Balochistan's share includes a 15% fully financed stake, with an additional 10% granted without cost.

· The recently completed updated feasibility study by OGDCL in March 2025 confirms the Reko Diq project will operate for a useful life of 37 years across two development phases.

o Phase 1 is scheduled to commence operations in 2028 with an annual processing capacity of 45 million tonnes.

o Phase 2, planned to begin in 2034, will double processing capacity to 90 million tonnes annually.

· The project is forecasted to generate up to $74 billion in revenue over 37 years once operational.

c. Regulatory Environment

· The gold market in Pakistan operates under a multifaceted regulatory framework, shaped by the policies and oversight of several key institutions.

· The Ministry of Commerce sets trade policies, the FBR enforces taxation, the SBP regulates foreign exchange, the TDAP facilitates exports and the Pakistan Gems & Jewellery Development Company oversees quality standards.

· Despite their mandates, coordination gaps and overlapping responsibilities among these regulators often lead to inefficiencies, creating barriers to a competitive and transparent gold market.

d. Regulatory Impact

· The regulatory framework governing Pakistan's gold market is shaped by a series of Statutory Regulatory Orders (SROs) and tax policies. This framework underscores the need for balanced reforms that mitigate anti-competitive features while preserving regulatory objectives.

e. Market Structure

· Geographically, Pakistan's gold market is concentrated in major urban centers such as Karachi, Lahore, and Peshawar, where Sarafa Bazaars (traditional gold markets) dominate trade.

· Pakistan has limited formal refining capacity, with the Pakistan Mint and a few private refiners serving as key players.

· Small-scale informal workshops (particularly in Karachi, Lahore, and Gujranwala) dominate the refining segment, often melting and recasting gold without certification, leading to quality and transparency issues.

· Smuggled gold networks operate outside formal channels, offering cheaper but untraceable gold, which undermines tax revenues and regulated market dynamics.

Challenges

· Pakistan may come under the radar of the Financial Action Task Force (FATF) due to failure to regulate its gold market, as 90% of the metal is still traded without formal channels.

· FATF had urged Islamabad to regulate its bullion market but the bulk of gold is traded outside of formal channels while the gold association sets prices, though no price mechanism exists.

· A majority of gold dealers are not registered with the Securities and Exchange Commission of Pakistan (SECP).

Recommendations

Unified oversight for a streamlined gold sector — one regulator, one rulebook — is needed.

· There is a pressing need to create a unified regulator, the Pakistan Gold & Gemstone Authority, to harmonize rules, licensing, imports and comply with anti-money laundering and countering of terrorism financing mechanisms.

o For Reko Diq, the Authority would coordinate with Balochistan's provincial government and stakeholders to standardize royalties, monitor production flows and prevent cartelization of its output - mirroring Türkiye's success in linking domestic mining to its gold banking system.

· The CCP has proposed mandatory assaying and hallmarking nationwide to ensure purity, protect consumers and enable exports.

o It stressed the need for digital transformation of the gold value chain with blockchain-based traceability integrated with the FBR's track & trace system.

· The CCP has also called for establishing a gold banking system, based on the Türkiye model, to bring household gold to the formal sector.

o It urged the government to strengthen data governance through centralized reporting, market documentation and scientific price monitoring.

The writer is an Advocate High Court.

Gold market plays a vital role in Pakistan's economy and society, as the annual consumption of this precious metal in the country ranges between 60 and 90 tonnes, mainly driven by cultural demand. However, the sector remains largely informal, with over 90% of gold trading taking place outside formal channels. The sector suffers from limited domestic refining capacity, inadequate compliance with hallmarking and quality standards and acute data deficiencies that undermine effective oversight and policy design.