WHY GOLD PRICE IS RISING IN INDIA
Gold is a chemical element with the symbol and atomic number 79, making it one of the higher atomic number elements that occur naturally. In a pure form, it is a bright, slightly reddish yellow, dense, soft, malleable, and ductile metal. Chemically, gold is a transition metal and a group 11 element. It is one of the least reactive chemical elements and is solid under standard conditions. Gold often occurs in free elemental form, as nuggets or grains, in rocks, in veins, and in alluvial deposits. It occurs in a solid solution series with the native element silver and also naturally alloyed with copper and palladium.
As per the world gold council, gold demand in India is about to rise 33% by 2020. … Recently India has become the largest consumer of gold and the price of gold is likely to breach Rs 32,000 mark in the next calendar year. There is an inverse relationship between the gold
prices and the dollar.
Gold has been one of the most traditional forms of investment. Before we knew about fixed deposits or stock markets or mutual funds, buying gold was one of the preferred means of investing. In India, gold has always had relevance since it was used during
weddings and festivals as a sign of opulence. Over the years, investing in gold has evolved as an ideal hedge for volatile markets primarily due to the scarcity of the metal.
In recent months, gold prices have been on a constant rise. And after the crash in March due to the lockdown, they have managed to surge and cross the 50,000 mark in July 2020. Many investors are concerned with the sudden surge in gold prices. And so, many investors started buying undervalued, high-quality stocks. However, with time, the hopes of a near-term recovery got dampened and investors started looking at a safe haven for their funds. Since gold is considered to be a perfect hedge against inflation and economic turmoil, the demand for gold increased.
- High Liquidity
The RBI allowed borrowers to avail of a moratorium on loan repayments till August 31, 2020. The Government also declared a lot of economic stimulus packages to pump liquidity into the markets. So, we had a situation where investors had money to invest but the stock markets were highly volatile and interest rates were falling. Hence, they started investing in gold that is known to
be a safe investment during such times.
- Reduced Gold Mining
The primary factor that affects gold rates is the demand and supply equation. While the demand increased, gold mining activities were severely impacted due to lockdowns in various countries. This impacted the supply causing the prices to rise further.
- Exchange Rate
The Indian Rupee has fallen sharply since the lockdown. Currently, it is around 75 against the US dollar. Since India is the second-largest importer of gold, such exchange rate fluctuations impact gold prices.
- Rise in International Gold Prices
The price of gold in India is affected by its international price. Over the last few weeks, rising number of coronavirus cases, increasing US-China tensions and overall economic slowdowns have led to a the constant rise in gold prices around the world.
So these are few reasons for price rise of Gold In India.