Impact of Inflation, Currency, Gold and Interest Rate on Stock Market of Pakistan

Abstract

This study explores how inflation, gold returns, exchange rates and interest rates influence the performance of the Pakistan Stock Exchange (PSX) over the period from 1985 to 2024. Using descriptive statistics, correlation analysis, and regression models, the research finds that inflation, currency depreciation and rising interest rates have a significant negative impact on stock market returns. In contrast, gold prices tend to perform well during inflationary periods, reaffirming gold’s traditional role as a safe haven asset in times of economic uncertainty. These findings offer valuable insights for investors, financial analysts and policymakers particularly in emerging markets like Pakistan, where economic conditions are often unstable and inflationary pressures persist.