In India, gold has long been a symbol of riches. When it comes to adding a sense of prestige to a position of honor at a wedding or religious ceremony, most people think about it.
Because gold is associated with spiritual ideas, many people regard it as a viable investment option even when the economy declines!
It's not unexpected that so many people have questions regarding gold, such as "Is gold always regarded as wealth?" and "What causes the price to fluctuate?" So, let's get this party started!
The 3 proven points to predict the price of gold are as follows -
- Regulations
- Seasons
- Digitalization
- Hedging
Regulations
The changes in the rules by Authorities
RBI
The Reserve Bank of India is the country's central bank. When inflation is too high, the economy is faltering, or there is a possibility of a recession, the central bank decides whether to buy or sell gold.
When the central bank purchases gold, the price of gold rises. The price of gold falls when the central bank sells gold. When investing, it is critical to be informed of the decisions made by a governing body.
Regulatory Policies
When investing in gold, one of the most significant factors to consider is the impact of government fiscal policies on the price. The Indian government has a long history of utilizing gold import duties to control the price of precious metals.
The government has done this in the past by lowering gold import duties when it appeared that the metal's price was falling.
When it seems that the price of gold is rising, the government has gone the other way and increased the import duty.
The amount of gold brought into the country also has an impact on the price of gold.
The price of gold is likely to rise if a large amount of gold is imported on a regular basis & is projected to fall as the volume of gold imported decreases.
Interest Rates
Both interest rates and gold prices have an inverse relationship with one another. The price of gold tends to fall as interest rates rise, and vice versa. People began to sell gold when interest rates rose in 2008, for example, since they could achieve a better return by investing in something else.
In 2010, the rate of interest fell, causing individuals to acquire more gold because it became more inexpensive than other investments like equities and bonds.
2. Seasons
Sounds absurd but it’s true that seasons affect the prices of gold.
Healthy Monsoon
The monsoon season in India raises the demand for gold among rural Indians.
The monsoon is India's lifeblood. It is the most important factor in determining the country's agricultural output. As a result, the monsoon has an impact on gold demand.
Farmers can sell their produce at better prices when agricultural output rises. This results in more disposable income, which they spend on gold, resulting in a price increase.
Festive/Wedding Season
India has one of the world's fastest-growing economies. Along with this, India's wedding business has exploded, with the number of weddings held in the country increased by almost 2000% since 2001.
Because there are so many Indians getting married, there is a huge demand for gold in the months leading up to wedding season, which serves to raise its value and make it more expensive than usual.
Second, when India celebrates holidays like Diwali, the price of gold rises dramatically because we have a practice of buying gold on Dhanteras Day, which inflates demand.
3. Digitalization
In economics, there is a theory of demand and price that states that, if the price of a product or service increases then the prices of that product or service also tend to increase.
Similarly in gold, due to digitalization, everything is accessible at our fingertips. People can easily buy gold online from the comfort of their homes. Because of this, the price of gold is all set to increase as we speak.
Therefore, don’t miss the opportunity, hope in the rocket, and invest in Digital Gold now!
4. Hedging
In simple words the downside protection via purchasing other assets for diversification.
Inflation
People may choose to invest in gold as a hedge against inflation as it rises. If held for a long enough period of time, gold prices tend to stay steady and keep their value.
According to a WGC (World Gold Council) report, for every 1% increase in inflation, gold demand in India rises by 2.6 percent, according to the World Gold Council Report.
Economic Turbulence
Everyone desires a safe shelter for their money during a catastrophe. Gold is a sort of currency that almost never expires because it is always something that people can use.
As a result, gold has a positive impact during a crisis, as investors buy gold to use as a temporary holding place for making everyday purchases all over the world.
Financial Assets
The use of gold as a portfolio diversifier is one of the most effective portfolio-diversification methods for investors concerned with protecting and expanding their wealth over time.
Even when major equities and bonds are collapsing, gold tends to rise in value rather than decline - gold drops in value only extremely seldom and insignificantly compared to other commodities like oil.
This makes it an excellent investment for people who wish to preserve their wealth while also limiting their chance of loss!
Conclusion
As can be seen, demand and supply have a significant effect on gold pricing. Due to the fact that gold cannot be created out of thin air, the supply of the commodity is limited. This qualifies it as a precious metal, which explains why it is so expensive.
