[Reasons] Why Gold Price is Rising | Sudden increase in Gold Price | Gold Investment
A Sudden Increase in gold prices is now becoming the latest threat to the World Economy. Due to the great market shut down by many companies in almost all sectors has now become the most important issue for the rising price of gold to a very large extent.
Let us look into some of the most important factors that determine the price of gold. One thing which is sure is that the prices of this metal are affected considerably by the international markets. India is one of the largest consumers of gold and as such any kind of movement in its prices internationally, has a huge impact on the prices here in India.
Central banks of most major countries hold both currencies as well as gold reserves. US Federal Reserve of the US and Reserve Bank of India are two prime examples of this. When central banks of large countries start holding gold reserves and procuring more gold, the price of gold goes up. This is because the flow of cash in the market is increased while the supply of gold goes down.
Due to the fear of the increment of this virus, there has become a very bad impact on the share market of the world.
Apart from the above factors listed below, there are other similar factors too like the production of gold and its subsequent production cost that influence the price of this metal. However, the bottom line to keep in mind is that no matter how numerous the factors affecting the gold rate may appear, ultimately it all boils down to the demand-supply game. The basic demand-supply mismatch is one of the primary reasons that drive the price of the yellow metal. This mismatch may, however, be created by several situations, some of which are have been discussed in the points above.
A Sudden Increase in gold prices is now becoming the latest threat to the World Economy. Due to the great market shut down by many companies in almost all sectors has now become the most important issue for the rising price of gold to a very large extent.
Top 6 Factors That Affect Gold Rate In India
Gold is one of the most revered metals in Indian culture. From festivals to weddings to birthdays, no auspicious occasion goes by without making use of this metal. Indian temples are famous for their new as well as ancient gold idols which are guarded against any kind of theft or robbery. Most Indians look up to gold as a thing of investment that can be used in times of financial crisis. While gold has been living up to its standard for a very long time, lately the metal has started to lose its shine. The prices of gold have been tracing a downward spiral and as such customers have procured this metal in the hope of reaping substantial benefits when the price of the metal goes up again.Let us look into some of the most important factors that determine the price of gold. One thing which is sure is that the prices of this metal are affected considerably by the international markets. India is one of the largest consumers of gold and as such any kind of movement in its prices internationally, has a huge impact on the prices here in India.
1.Inflation
Gold, due to its almost constant character as compared to the currency of any country, holds significant value or constant value and is used to hedge or control inflation. This is why investors prefer to hold gold rather than the currency of any country because of its constant growth. As a result, when inflation is high or on the peak, the demand for gold increases and vice versa. The price of gold will then shoot up or increase as a result of high demand from customers. This holds true for both international inflations as well as that which occurs in India or any other country.
2.Global Movement
Any global movement in the price of gold affects the price of the yellow metal in India. This majorly derives from the fact that India is one of the largest importers of gold and as such when the import prices change due to global movement in price, the same is subsequently reflected in the prices of gold at home. Since the value of the currency as well as various financial products may fall during any political upheaval, gold is seen as a safe haven by investors and as such the demand and price of the gold rise in times of political chaos as compared to peaceful times. The interest in buying gold rises among consumers when their confidence in the government and markets falter and as such gold is called the crisis commodity.
3.Government Gold Reserves
Central banks of most major countries hold both currencies as well as gold reserves. US Federal Reserve of the US and Reserve Bank of India are two prime examples of this. When central banks of large countries start holding gold reserves and procuring more gold, the price of gold goes up. This is because the flow of cash in the market is increased while the supply of gold goes down.
4.Jewelry Market
Indians love their gold jewelry. Be it festivals or birthdays, gold jewelry holds a special place in Indian households. During the wedding season and also during festivals like Diwali, gold prices go up as a result of increased consumer demand. The demand-supply mismatch leads to raised prices. The demand for gold does not just end at jewelry requirements. The metal is used in small quantities by various electronic companies for the manufacturing of devices like television, computer, GPS, etc. In India, gold is used for jewelry requirements, as a gifting article, for showing off wealth as well as a strong hedge against rising inflation. All these combined make the domestic demand for gold rise so much that India has to time and again import huge quantities of the yellow metal. The industrial demand for gold accounts for 12% of the total demand for gold in the country. Medicine is another5.Interest rate trends
Interest rates on financial products and services are tied closely with the demand for gold. Current gold prices are generally good indicators of the interest rate trends of any country. With increased rates of interest, customers tend to sell gold to acquire cash and as such an increased supply of gold leads to reduced rates of the metal. Alternatively, lower interest rates translate to more cash in the hands of customers and as such greater demand for gold and thereby increased price of the metal.6.Corona Virus or COVD-19(This has been included because of the latest issue not an all-time major factor for the increase in the price of gold)
A greater possibility could be the COVD-19 or Coronavirus which is being spread all over the world like a wildfire. It was the first found in China. Till the date of my article published the treatment is not found for this dangerous virus. This has to lead a very bad impact all over the world because one of the largest exporters of all types of goods is now at a very big loss.Due to the fear of the increment of this virus, there has become a very bad impact on the share market of the world.
Apart from the above factors listed below, there are other similar factors too like the production of gold and its subsequent production cost that influence the price of this metal. However, the bottom line to keep in mind is that no matter how numerous the factors affecting the gold rate may appear, ultimately it all boils down to the demand-supply game. The basic demand-supply mismatch is one of the primary reasons that drive the price of the yellow metal. This mismatch may, however, be created by several situations, some of which are have been discussed in the points above.
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