These are the important reasons for the fluctuation in gold price, know why prices have increased suddenly
2 min read
New Delhi, Prathamesh Malaya. Be it family celebrations or religious festivals, gold has been an integral part of the cultural needs of the Indian consumer. Gold has been important for jewelry making as a physical asset and it has not traditionally been seen as a salable asset by us Indians. Nevertheless, these market dynamics along with many other determinants impact the market and contribute to the demand and supply cycle. These can be economic, regulatory, cultural trends, inflation, and prosperity among other factors. However, the 5 most important factors affecting pricing are as follows.
Economic uncertainty
When economic growth stagnates due to a crisis, it usually affects the equity market, global trade and the financial ecosystem. Market volatility arises due to fluctuations in supply and demand. This uncertainty forces investors to diversify their investment portfolios as they move towards securing their finances through safer options. In such a scenario, people turn to safe asset class for investment. Among these, gold is the top option, which increases demand and increases its price.
Similarly, the arrival of the current Kovid-19 crisis has wreaked havoc worldwide. In our country too, the price of gold has increased by more than 11% in April itself. In a period of 6 months, gold prices have risen from Rs 30,000 to over Rs 50,000 per ten grams in today’s situation.
government policies
India is among the top two global consumers of gold. Government decisions affect the price rise in gold prominently. When the Reserve Bank announces its interest rates and fiscal policy, annual acquisition of gold, sovereign bonds, etc., it has many effects on market sentiment, which can move prices up or down. For example, in times of crisis the financial bailout package, the policy of taxation on property, and other micro-policy decisions are entirely the government’s. Such decisions are often taken in view of the macroeconomic consequences of the economic crisis. However, economic revival is associated with a sharp increase in cash flows and commodity markets.
