Few significant factors involvement the price of gold are mention here -
- Demand of gold :
The gold demand in India is linked to culture, tradition, the desire for beauty, and financial protection. According to a study conducted by the World Gold Council, commissioned by the Global Gold Council (FICCI), Indian consumers regard gold as an investment and a décor. When asked why they bought gold, nearly 77% of those surveyed cited investment security as a factor while only just over half cited it as the rationale for buying gold.
- Volatility protection :
People would like to invest in or buy gold to guard against volatility and insecurity. Indian households regard gold as the security haven, a buying asset if another asset loses value, as the preference for physical assets. Most investors would buy gold, whether the domestic economy was growing or in recession, underlining Gold's attraction as an asset for good and bad times.
- Inflation and Gold :
When inflation increases, currency values decrease, hence the use of gold as money. Therefore gold is an instrument for preventing inflation in times where inflation remains high over a longer period. In the inflationary period, this pushes gold prices higher.
- Interest and gold rates :
According to industry experts, there is a negative link between gold and interest rates under normal circumstances. The increase in income shows a strong economic expectation. Inflation is caused by a strong economy and gold serves as a cover against inflation. In addition, when rates rise, investors flock to fixed revenue investments that return a fixed return, as opposed to gold with no such return. Demand, therefore, takes a rear seat, where prices remain flat.
- Impact of the equation between rupee and dollar :
In the Indian gold rate, the rupee-dollar equation does play a role even if it does not affect international gold prices. Gold is largely imported, and therefore gold prices are likely to rise in the rupee if the rupee weakens compared to the dollar. A depreciating rupee can therefore dilute the country's demand for gold. Remember, however, that changes in rupee-dollar rates have no effects on dollar gold rates.
- Market Of Indian Jewelry :
Gold jewelry is an integral part of most festivals and weddings in India. This is why the demand for gold increases, boosting its price, during festivals and wedding times. The industrial gold demand is 12% of the country’s total gold demand.
- Relationship with other asset class :
Some economists believe that gold is a very effective diversifier in terms of portfolios because of its low to negative correlation with all major asset classes. Gold, however, is a mainstream asset grade, generally showing no statistically significant correlation. However, there is evidence that a retrograde correlation can develop between gold and stocks, that is when stocks quickly decrease in value. Gold protects its portfolio against volatility because factors that affect returns of most classes do not have a significant effect on gold prices, either on the macroeconomic or the microeconomic fronts.
- Demand for Gold in Future :
The demand for gold is estimated to be 1,000 tones higher than the supply. Most of the gold is recycled without the new mining capabilities. Less supply, therefore, contributes to changes in gold rates.
Conclusion :
Other similar factors, such as gold production, and its cost of production after that, influence the price of gold beside the factor listed above. The final thing to keep in mind is, however, that regardless of how many gold-rating factors may appear, everything ultimately goes down to demand supply. For example, today’s gold rate in Hyderabad depends on global gold rates, inflation, changing prices, the central bank gold reserve, fluctuating interest rates and the jewelry market. Hyderabad’s rate is based on international factors. Gold Rate today in Hyderabad is Rs. 4,560.
