Indian gold investors have made good money during the last ten years. Prices were boosted by a combination of a rebound in worldwide prices and a dropping rupee, resulting in relatively reasonable annualized returns for investors. Now let us take a closer look at gold’s historical prices throughout the last decade.
Gold is a tough metal, which has some interesting properties. It’s nearly impossible to find, and unlike other metals, it never loses its value. Gold is a metal that has been used as money for thousands of years. The reason is simple: gold has always been considered valuable by humans.
Variables Responsible for Rate Shifts in Gold
The important variables responsible for rate shifts in gold are as follows:
- Rates of Interest:
As interest rates fall, consumers do not receive favorable returns on their capital assets. As a result, they use their savings to buy gold to earn a profit. As an alternative to earning interest, individuals are encouraged to keep as much liquid or investable wealth in gold as possible, which then increases its demand. As the price of gold increases, it becomes more expensive to buy, causing global prices to decline.
As inflation rises, money loses its worth. Furthermore, the majority of investment options fail to outperform inflation. As a result, gold has become more appealing as a haven and most consumers begin investing in gold due to its high returns.
- Supply And Demand:
Gold is a long-term investment with a value that is forward-looking and based on anticipated future demand and supply. On the other hand, limited gold mining operations have resulted in a drop in supply over time, failing to satisfy rising demand. Gold prices over the past ten years have increased by about nine times.
- Fluctuation in the Value of Currency:
From an Indian perspective, gold is predominantly imported and traded in USD on the global market. After importation, it is exchanged into INR resulting in fluctuations in USD and INR. Both of these factors could affect the export price of gold.
- Reserves Held By the Government:
The Indian government holds the largest gold reserves in the world and can make gold trades through the Reserve Bank of India based on its policy. Its cost will fluctuate depending on how often consumers buy or sell gold.
- The Market for Indian Jewellery:
Gold is widely used in India and today’s gold price has changed due to factors such as an increase in its popularity as a wedding gift and an increase in demand.
- International Market Fluctuation:
India has been significantly reliant on gold imports from other countries. The current spike in gold prices is largely attributed to India’s reluctance to buy more reserves, as well as the changes in its gold importing habits that have occurred over the past few years.
What Does the Future Hold for Gold Cost?
With the recent upward movement in prices, we believe that a long period of stability is ahead. A trigger, such as geopolitical stress or a COVID, is required for gold to rally. Surprisingly, the world economy is picking up speed and this is excellent news for stocks but bad news for gold. There are currently no triggers for a large rally in gold in the near to medium term.
Why Is Gold Getting More Expensive?
Gold prices have been steadily increasing after several years of stagnation. The recent spike has piqued the interest of investors. According to specialists, this increase in value is due to several variables. To find out the answers, we’ll look at four reasons how much is the price of Gold have climbed in recent days:
- The Slump in the Economy:
Gold’s attractiveness as a safe haven during uncertain times is due to its scarcity, track record of endurance and affordability. Global economic uncertainty and interest rates fell, sparking increased demand for gold. Consumers turned to gold again after rising interest rates and global uncertainties drove up inflation.
- Dollar Value Is Low:
The rising gold prices are influenced by many factors, but one of the major ones is a weakened US dollar. As a result of the drop in value of the US dollar, demand for gold increases and conversely, as previously stated. This makes other currencies more valuable and drives up inflation. Additionally, since inflation remains high and investors seek safe ways to protect themselves against future increases in prices and lower returns, they turn to gold as an option.