THE SURGING METAL

 

Gold is one of the most precious metal both for the humans and the Investors. Before we knew about the shares, bonds and securities, Gold has been one of the most reliable investment. It is being used in the Weddings, Gifts, Festivals as being an opulence.

In the developing Nation like India, Investors have created a hedge of investment in the yellow metal which also gave robust returns, it seems a perfect ROI to them. Gold has been in a constant rise, crossed the 50,000 mark amidst the nationwide lockdown after July,2020.

But the question that hits the mind is WHY?

Now let us first understand the factors that affect the gold prices-  

 

§      Demand and Supply

Demand and Supply is one of the most common and essential factors in any of the security or investment. It is as simple as if the demand of a particular commodity rises, its price will soar and vice- versa. Since the Gold mines were at halt and due to which there was low extraction of Gold and so the demand for yellow metal increases as the supply is low, and prices were touching sky. India is the 2^nd largest importer of Gold in the World and to fulfill the demands of its nationwide peoples, prices saw a jump because of the currency fluctuations or exchange rates which we’ll see further.

 

§       Inflation:

Inflation is the friend of Economy (if it is healthy) who never leave the hand of its people. 

This inflation also came into effect in the case of stocks, metals, currencies, securities, and the bond market. Whenever there is inflation in the economy that means currency is devaluing at the same time or Increase in inflation equalizes itself with the decrease in currency valuation (an inverse relationship sometimes could be a turmoil). Amidst the time of inflation, most investment avenues fail to give inflation beating returns. Here’s where gold come into picture, a haven as being a very liquid asset. With an inflation rate of 28.60% in 1974 across the Nation, the gold price had jumped to Rs 506 from Rs 278 (a change of more than 50% represents a substantial growth in the yellow metal).

 

§       Interest rates:

There is an inverse relationship between gold prices and interest rates. As long as interest rates increases, it seems a good opportunity to invest in Gold as decreasing in interest rates suggest people are not getting good returns on their deposits and therefor they tend to move under a safe shelter i.e. Gold.

 

§     Market of Indian Jwellery:

At the time of festivals, weddings, seasonal changes, the Jwellery market see a boom and because of which the price surges.

 

§      Government reserves:

Government creates certain amount of gold reserves in its haven overlooked by the RBI. The present Gold reserves of India are 657.7 tonnes (7.5%) and RBI is constantly vigilant to increase its gold reserves by 10%. United States is having the highest percentage of gold reserves with 79% of total reserves equalizes to 8133.5 tonnes.

The Govt. in accordance with its policies can buy or sell Gold through RBI and on which the demand and prices of yellow metal dependent upon.

 

§     Currency Fluctuations:

Gold is being traded in the terms of Dollars in the International Market. Gold is being highly imported in India because of the countable number of gold mines, if rupee weakens in terms of dollar, there are certain chances of appreciation in Gold prices in rupee terms.

Import duty:

Import duty is a tax imposed by the Government on importing the goods from abroad. To satisfy the plethora of demand of the public of India, Government imports gold in bulk and due to levy of the import duties, it becomes expensive and therefore, this could be a reason of increase in Gold prices.

Due to lockdown in the Nation and in different parts of the World, employees are being laid off due to the inability of the companies to pay its employees due to a halt at their doorsteps,

still gold is on track?

People are not only reluctant on savings but also on its interest, fall in the interest rates push the public to have a safe haven with a better interest policy. Due to the halt at extraction of gold demand has increased at an uncertain level and plunge in supply increases its prices. Due to the stimulus packages delivered by the Government over the past few months has somehow increased a little bit hope of incomings which not only increases the hopes of Stock markets but also the commodity markets.

 

 

 

                                                                   ~ RAGHAV SRIVASTAVA