Despite recording a weekly contraction, Pakistan’s broad money supply (M2) marked a cumulative rise of Rs4.385 trillion year-on-year.

According to data compiled by Optimus Capital Management, M2 stood at Rs39.715 trillion, down Rs269 billion week-on-week, driven primarily by a reduction in total deposits held with banks, while credit to the private sector and government borrowing patterns reflected mixed movements within the financial system, marking a cumulative rise of Rs4.10 trillion since the beginning of the calendar year and Rs4.385 trillion year-on-year.

The weekly decline was led by a drop of Rs201 billion in total deposits with banks, which stood at Rs28.771 trillion, a reversal from recent weekly increases. Currency in circulation (CiC), a key indicator reflecting cash held outside the banking system, also fell by Rs67 billion to Rs10.900 trillion, although it remains 1.8% higher on a fiscal-year-to-date basis and 1.6% higher year-on-year.

CiC as a share of total money supply remained stable at 27.4%, maintaining a tight liquidity position within banks.

Net domestic assets of the banking sector declined Rs197 billion, while net foreign assets dipped Rs73 billion, reflecting marginal external outflows and balance sheet adjustments within the banking sector.

Government borrowing stayed strong despite a weekly dip. Net federal government borrowing slipped by Rs17 billion week-on-week, settling at Rs36.275 trillion. Borrowing from scheduled banks declined Rs137 billion, whereas borrowing from the State Bank of Pakistan (SBP) rose by Rs119 billion, partially offsetting the withdrawal from commercial banks.

Despite the weekly fluctuation, the federal government borrowing remained Rs5.438 trillion higher in the calendar year to date, underscoring the state’s continued reliance on banking channels to fund fiscal operations.

The SBP on Friday injected substantial liquidity, Rs2.6 trillion, into the financial system through two separate open market operations (OMOs), a conventional reverse repo operation and a Shariah-compliant Mudarabah-based facility.

According to the conventional OMO auction results, the SBP injected Rs2.44 trillion, accepting 100% of bids received across seven-day and 14-day tenors. In the Shariah-compliant Mudarabah-based OMO, the SBP received offers worth Rs218 billion for the seven-day Islamic tenor, of which Rs173 billion was accepted at a return of 11.05% per annum, with two bids cleared.

Moreover, the rupee inched up 0.01% in the inter-bank market, closing at 280.42 against the US dollar compared to 280.45 a day earlier.

Meanwhile, gold prices in Pakistan rose sharply, following gains in the international market, where gold surged 1% amid growing expectations of a US Federal Reserve rate cut next week.

In the local market, the price of gold per tola climbed by Rs3,000 to Rs444,462, while 10-gram gold increased by Rs2,572 to Rs381,054, according to the All-Pakistan Gems and Jewellers Sarafa Association. On Thursday, gold had dipped by Rs1,700 per tola to Rs441,462.

Internationally, gold rose $30 to $4,221 per ounce, with spot gold trading at $4,255.59, on track for a 0.5% weekly gain, Reuters reported.

Silver reached a record high, gaining Rs72 to Rs6,072 per tola. Adnan Agar, Director at Interactive Commodities, noted that strong global physical demand, especially in China and Europe, is creating a supply squeeze, pushing prices higher.

He said the gold market remains bullish but is currently in a consolidation phase. “Prices may continue to rise towards all-time highs, but clear direction will emerge after the upcoming US Federal Open Market Committee (FOMC) meeting,” he explained.

Global factors such as central bank purchases, currency devaluation and growing investor preference for safe-haven assets are driving the upward trend in metals, with silver, platinum and copper also trading near record levels.