Factors Affecting Gold Prices in India

Factors Affecting Gold Prices in India

For representational purpose


Factors Affecting Gold Prices in IndiaGold rates are major variants across the entire country.

Factors Affecting Gold Prices in India Gold rates are major variants across the entire country. The given notion firstly means Gold rateis not a constant being, and secondly, the rates are not the same across all parts of India. Gold consumption stays high as ever, but the price shows an otherwise trait across decades. Demand plays a role in fixation of price, but that is not all.

Multiple reasons dwell and alter the price of gold, leading to fluctuation of any fashion. We have compiled a small list for you, where we discuss the major factors affecting golf Prices in India.

Demand and Supply

Major demand for the metal in found in South India, where people use Gold as a part of their daily life, and also love making hefty investments in them. The states Tamil Nadu and Kerala have the highest of demand and hence, the Gold price in Chennai and Gold price in Kerala take the likewise pathway of change.

Maintaining demand and supply equilibrium is barely a happening, following which the imbalance leads to rise or fall in price of Gold. For instance, if the demand for metal rises, with a fall in supply rate, the prices start rising high. But, when the supply of the metal is high, with a contrary fall in demand, the prices shoot down.

Inflation Rate

The inflation rate has a major role to play in Gold prices. Similarly, if you check the rates of gold a few decades ago, you can see a major shift in price, which is a result of increase in standard of living.

The reason is low buying capacity of local currency, which triggers investors to buy gold. This shoots up the demand of gold, which is followed by rise in rise, and vice versa.

Central Bank's Resolution

Central bank decides to make changes to its reserve of Gold, based on the market conditions. This means, it decides to either buy or sell gold as per the economy's need. When an economy is booming, the bank decides to sell off gold, releasing high supply of the metal and taking down the price of gold.

The way, Reserve Bank of Indian introduces changes to the demand and supply curve of the market, whenever the need of the same arises.

Interest Rates Policy

Gold rates and the Interest rates go on the opposite track generally. It is because change in the interest rates makes other financial instrument highly or less likely an option. If interest rate are high, investors are inclined to invest in the likewise instrument for high return and earning. Contrarily, if interest rates are low, people choose to invest in Gold.

Festive and Wedding Season

It is at the time of festivals and wedding seasons that the demand for the metal shoots high above the normal threshold. The reason is simple, we Indian are highly in love with our Gold and how we have adopted it as a part of our culture and status.

This high demand of Gold during such seasons leads to a significant fall in supply. Such high demand struggler the price of the metal, and it starts reaching new heights.

Currency Strength

Demand in our country is unimaginably high, and in order to meet the demands, a major proportion of gold sold is imported. Hence, any imbalance in foreign and Indian currency leads to a shift in Gold rate. If Rupee value falls, the imports become expensive, and they experience a backlash with high prices, which further leads to fall in demand.

Pointing out the Indian market situation, it is affect by the relationship between Rupee and Dollar.

Geo Political Factors

Changes are also introduced by our Government, where Global impact is noticed. Such Geo political factors and tensions or changes in relationships between countries are likely to impact the price of this yellow metal to a great extent. Few of the examples where demand for gold increases are Crisis and war like situation.

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