Gold is a precious yellow metal which always displays its charm and beauty. Over the years, gold jewellery is being used by both men as well as women. In India, gold not only carries a materialistic value but also sentimental value. Gold is considered to be an auspicious metal to buy during Diwali, Dussehra and Akshaya Tritiya and certain other festivals too. Wedding is the occasion where people in India, spends a lot of their savings to buy gold ornaments. Due to all these reasons, India is considered to be one of the biggest consumers of gold.
Gold is not just attractive to women but investors too, and hence they take a lot of interest to know the current gold rate, in order to know the value of their assets. When economy is not in very sound position then gold can be used as a commodity to control the situation and you will get good value by selling it in the market.
Now let us try to understand how the gold rate today is determined in India. Since gold is one of the first things that is considered for any kind of celebration at what price you will get gold from the market is very important for people to know. The rate at which you buy gold, may not be the same when you sell, due to a number of factors. However, if you are dealing with gold bars whose purity is known, then there will be no difference in buying and selling rates. Following are few factors that will decide the current rate at which you can make transaction with gold.
- Dollar rate
The rate of gold is inversely proportional to the rate of US dollars. Whenever the rate of US dollar goes up, the rate of gold will decline and vice versa. That is because central bank maintains US dollars to hedge the devaluation risk due to increase in the rate of gold investment. Therefore, if there is any fluctuation in the US dollar, the gold rate in India will also vary.
- Supply of gold
Supply of gold is also another reason to change the gold price. If there is more supply of gold then gold price will tend to decline.
- Production cost of gold
If the production cost of gold increases then gold price too will rise up.
- International relations
If the geopolitical relation between nations is not good then it impacts very heavily on the price of gold.
- Gold reserve measure
Reserve bank of India keeps certain gold reserves for future use and if they try to buy more gold then gold price may rise.
- Increasing demand
Like theory of economics supply/demand imbalance will affect gold price.
Gold is basically meant for controlling inflation. Therefore, if the inflation is high then gold coin rate will also tend to go higher.
- Economic instability
If there is economic instability then gold price may go higher.
- Low interest rates of fixed deposits
When interest of FD decreases then people tend to buy gold and the demand for gold increases and as a result the rate of gold too increases.