Factors that have an impact on gold prices

There are many factors affecting gold price set by investors and traders. As an investor would be beneficial for you to know these factors so that the next time you look up today gold rate in Agra or Jaipur you would know what the cause for the rise is or fall. Additionally, these factors help everyone to have a better understanding of how the market is working and further drive their investments. These factors are as follows:

1. World Gold Supply

The supply of gold has been falling over the last few years. This is because the gold that was produced in the past years has already been mined. As compared to the past, gold production is much lesser now. This decreasing supply of gold will inevitably drive the price of gold upwards.

2. Quantitative Easing

Quantitative easing is a process through which central banks purchase large amounts of government bonds and other financial assets to increase the money supply and boost the economy. The process of quantitative easing increases inflation and also debases currencies, which in turn increases demand for gold and hence, boosts its price.

3. Demand for Gold

Demand for gold increases during a period of economic slowdown or instability. Investors prefer to invest in gold because it is considered a haven asset class. India is one of the countries with the highest demand for gold due to its use in religious ceremonies and family functions like marriages. During marriage season or festivals you can search online today for gold price and you will see the direct correlation for yourself.

4. Inflation

Inflation increases the price of gold as well as the demand for it. People invest in gold when they are not happy with the returns offered by other investment options. So, if the rate of inflation increases then you will see an increase in gold prices as well.

5. Interest rates

A decrease in interest rates will increase the demand for gold as it is considered to be a hedge against inflation and recession. On the other hand, higher interest rates make investing in gold less attractive, thereby reducing its demand and prices.

6. Currency exchange rate

If there is any depreciation in the value of the Indian rupee then there will be an increase in the cost of imports, which may result in an increase in local gold price due to the high import duty levied on it by the government.

7. International Gold Price

The price of gold in India is dependent on international gold prices as well because most of the demand for gold in India comes from imports. Thus, if international prices are high then import costs will also be high which will lead to an increase in the price of gold. Similarly, if international prices fall due to low demand, then it can impact domestic prices as well.

8. Geopolitical tensions

The demand for gold increased in India during the geopolitical tensions. In such times, people prefer to buy gold as it is a safe investment and works as a hedge against inflation.

9. Stock Market Performance

If the stock market rises, then investors prefer equities and mutual funds over physical gold. Therefore, its demand falls and so does its price. It is also difficult to liquidate stocks quickly as compared to physical gold which can be sold immediately at market prices to meet financial obligations. On the other hand, if the stock market falls due to political or economic events then investors will sell stocks and buy physical gold thereby leading to an increase in its price.


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