The Golden Surge: Exploring the Factors Behind the Steady Increase in Gold Prices in India

In India, gold holds a special place in every household and symbolizes prosperity and wealth. However, with the recent fluctuations in the gold rate market, it has become increasingly essential to know the factors that influence the price of gold. At White Gold, we strive to provide you with the latest insights and updates on gold prices to help you make informed decisions.

Let’s explore the various factors behind the steady increase in gold prices in India.

Demand & Supply

Gold prices in India are greatly influenced by the relationship between demand and supply, much like any other traded commodity. Despite not being a consumable product like oil, gold is still a limited resource, with all mined gold in existence.

Because the yearly output of gold is relatively low, an uptick in demand can result in a corresponding increase in price due to the scarce supply. Thus, if you’ve been questioning the reason behind the rise in gold prices, it is likely due to the interplay between supply and demand.

Inflation

Gold is a widely preferred investment option due to its inherent stability compared to currency. It is often used as a hedge against inflation, as its demand tends to increase when inflation rates rise. This is why investors tend to hold onto gold rather than currency during times of high inflation, which causes the gold rate to rise due to increased demand. This trend holds both in the context of global inflation and within India.

As inflation rates rise, the currency’s value tends to decrease, and other investment avenues may fail to deliver returns that beat inflation. As a result, many individuals turn to gold as a safe investment option. Even if high inflation rates persist for an extended period, gold serves as an ideal shield since it remains unaffected by currency fluctuations. 

Government Gold Reserves

Central banks of major countries typically hold both gold reserves and currency, including the US Federal Reserve and the Reserve Bank of India. When these banks begin to increase their gold reserves, the gold prices in India tend to rise. This is due to an increase in the flow of cash into the market, with a corresponding decrease in the supply of gold. In short, the central bank’s actions can significantly impact the price of gold.

Interest Rates’ Trends

The trends in interest rates for financial products and services are closely linked to the demand for gold. This is because current gold rates are a reliable indicator of any country’s interest rate trends.

When interest rates rise, customers typically sell their gold to acquire cash, which leads to an increase in the supply of gold and a reduction in its price. On the other hand, when interest rates are low, customers tend to have more cash in hand, which results in an increased demand for gold and an increase in its price.

Imports Duty on Gold

India’s gold production accounts for less than one percent of the global total, yet it is a leading consumer of precious metals. To meet the high demand, India imports substantial amounts of gold, making import duty a crucial factor in determining this precious metal’s price. By closely monitoring and adjusting import duty rates, India can control the flow of gold into the country and help stabilize prices in the domestic market. 

Indian Jwelery Market

The Indian jewelry market is heavily influenced by cultural traditions, with gold jewelry playing a significant role in religious festivals and weddings. As a result, demand for gold increases during these seasons, leading to a rise in its price. This cultural significance of gold is one of the key drivers behind the fluctuations in India’s gold rate. 

Summing It Up

Understanding the factors that influence gold prices in India is crucial for making informed decisions about investments in India. At White Gold, we recognize the importance of staying up-to-date with the latest insights and updates on gold prices to help our clients navigate the market successfully. By keeping a close eye on trends of market and utilizing our expertise, investors can make smart decisions to ensure their financial prosperity.