What is the first thing that comes to mind when you hear the word Gold? Security for your loved ones, right? That pure intention to do something for our family is what Gold means to all of us.
But do you know what are the factors affecting the prices of Gold? Well, a lot of them. And now you may ask why you should know it.
To have a basic idea about when Gold is at peaks or a little down, You can figure out the best time to invest in Gold.
We know how important it is to get Gold at the best price to make the most of this precious investment for your loved ones.
So let's delve into the factors affecting the prices of Gold. We will also talk about the increasing prices of Gold later in this blog. So read it till the end.
The Demand & Supply rule applies to Gold as well. As you must already know, as the demand increases, its price increases and vice versa. But to know it more deeply, it is important to know which factors affect the demand for Gold.
The primary factor that affects the price of Gold is its demand. Mainly income and gold price level affect the consumer demand for Gold, per a report published by WGC.
People with more money due to increased income indulge in luxury items such as Gold. On the other hand, when gold prices are high, some buyers may shy away from making purchases, while lower prices can make Gold more attractive.
That's why income and gold prices are essential factors determining the demand for Gold among consumers.
Other factors that affect the demand and, ultimately, the rate of Gold are as follows:
As an Indian, you know how much Gold is ingrained in our culture. We buy & gift gold at weddings, festivals and special occasions as a mark of auspiciousness.
And do you know weddings account for 50% of the gold jewellery demand in India?
Yes, that's true.
Also, India is the second largest gold jewellery consumer in the world. According to a report by WGC in 2023, We consumed 611 tonnes of gold jewellery in 2021. That's huge. Isn't it?
The numbers might be huge, but there's a problem here. We will tell you why at the end.
Let's get back to the gold jewellery market in India.
The demand for Gold is highly affected by the condition of the jewellery market. During the wedding season, gold jewellery consumption increases so does its demand.
The demand for Gold also reaches peaks during festivals like Diwali. In India, buying Gold on days like Akshay Tritiya is considered auspicious. Due to such days and festivals, gold demand is highly affected.
Most central banks, including the Reserve Bank of India, hold gold reserves in addition to currency. When a central bank increases its purchases of Gold and reduces its sales, it can cause an increase in the price of Gold. This happens because more money enters the market while the supply of Gold remains relatively limited. So, the price of Gold goes up due to the increased demand.
Typically, there has been an inverse relationship between gold prices and interest rates. When interest rates rise, people sell Gold to take advantage of higher profits elsewhere. Conversely, when interest rates fall, people tend to buy more Gold as it becomes a more attractive investment option, increasing the demand and price of Gold.
Reports suggest that the demand for Gold in India is heavily influenced by rural areas, which comprise around 60% of the country's gold consumption. With annual gold consumption ranging between 800-850 tonnes, the rural demand significantly contributes to the overall demand for Gold in the country. Farmers account for almost one-third of the country's gold consumption. As farmers rely on good crops for their livelihood, a good monsoon season often increases gold demand as they invest in the precious metal to create assets.
Global movements in its value impact the price of Gold in India since it is one of the largest importers of Gold. Changes in import prices due to global fluctuations are usually reflected in domestic gold prices. As a haven asset, Gold attracts investors during political unrest or economic uncertainty, as the value of currencies and other financial products may decline during such periods. Consequently, the demand for Gold tends to rise during such times, making it a haven during a crisis. In summary, the price of Gold in India is influenced by global movements and tends to increase during political and economic uncertainty.
Understanding the relationship between the rupee and the dollar is crucial in determining the price of Gold in India. Since most physical Gold is imported, a weaker rupee against the dollar can increase the price of Gold in rupee terms. Conversely, if the rupee strengthens against the dollar, the price of Gold in India may decrease. Therefore, fluctuations in the rupee-dollar exchange rate can significantly impact the country's gold demand.
What is the reason behind the increasing gold prices in India?
According to the WGC report, for every 1% increase in inflation, gold prices rise by 2.6%. Increasing inflation is one of the major reasons behind the increasing gold rate in India.
Which is the best time to invest in Gold?
The best time to invest in Gold depends on your income and capacity to buy Gold. When you have put a certain amount of money aside for emergencies, the right time to buy Gold is now.
What form of gold investment should I consider?
There are many forms of gold investments, but the simplest is buying physical Gold. You can even buy Gold online in India using our website.
How can I get the best value out of my investment?
It is advisable to buy 24k pure Gold to get the most out of your investment. Because the more the purity, the more the Gold is valuable.
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