In Indian tradition, gold is one of the most valued metals. No auspicious occasion goes by without the use of this metal, from festivals to marriages to birthdays. Indian temples are known for their new and ancient gold idols, which are well-protected against theft and burglary. Gold is regarded by the majority of Indians as a valuable investment that can be utilised in times of financial difficulty. Gold has been living up to its reputation for a long time, but it has recently begun to lose its lustre. Gold prices have been on a decreasing trend, and as a result, clients have purchased the metal in the hopes of reaping significant rewards when the price of gold rises.
- Supply and Demand
The demand and supply of gold, as with any traded commodity, play a significant impact in determining its price. Gold, unlike oil, is not a consumable commodity. The globe still has all of the gold that has ever been mined. Every year, only a small amount of gold is mined. Because the supply of gold is relatively limited, the price rises as demand rises. As a result, if you’re wondering why gold prices are rising, one of the causes could be demand-supply situations.
The value of a currency depreciates when inflation rates rise. In addition, most other investing options do not produce inflation-beating returns. As a result, the majority of individuals begin to invest in gold. Even if high rates of inflation persist for a long time, gold serves as a great hedge since it is unaffected by currency movements.
- Rates of Interest
Interest rates and gold prices have an inverse relationship. People don’t earn decent returns on their deposits when interest rates decrease, producing an increase in gold demand and hence the price. When interest rates rise, however, consumers sell their gold and put it in savings accounts to receive a higher rate of return, resulting in a reduction in demand and price.
- Market for Indian Jewellery
Most religious celebrations and weddings in India include gold jewellery. As a result, demand for gold rises during festivals and wedding seasons, driving up its price. This is one of the causes behind the rise in gold prices in India.
- Fluctuations in the value of the dollar
Gold is traded in US dollars on foreign markets. When you import USD, it is converted to INR. As a result, variations in the USD or INR might affect the price of gold imports and, as a result, the selling price.
- Reserves held by the government
India’s government owns gold reserves. It can buy and sell gold through the Reserve Bank of India based on its policy (RBI). Whether it buys or sells more gold, the price of gold can be affected. As a result, if you’re wondering why the gold price in India is rising at any particular time, you should check into government purchases and sales.