Gold stands apart from other investments due to its intrinsic value and durability. The limited supply and lasting worth make it a dependable safeguard against inflation and economic instability. It is an asset recognised globally, with its purity measured in karats.
The 24 and 22 karat gold rates in Hyderabad and most cities tend to align with international trends. However, domestic demand, particularly during festive and wedding seasons, often drives short-term price surges. This seasonal increase in interest can significantly influence local market rates.
Beyond seasonal demand, various global and economic factors also play a role in gold price fluctuations. By understanding these key influences, you can make informed decisions about when to invest and how to optimise your returns.
Demand for Gold in India
Indians value gold for its cultural, traditional, and economic significance, often viewing it as a symbol of wealth and security. Rural populations prefer it due to its portability and reliability as an investment. Weddings account for nearly 50% of the annual gold demand.
However, the World Gold Council reported in August 2023 that record-high prices could reduce India’s gold demand by 10 per cent. This marks a three-year low and has the potential to limit global price rallies.
For Indian buyers, reduced demand within the country can lead to a decrease in the price of gold.
Market Volatility and Safe-Haven Buying
Indians consider gold a safe asset, especially during periods of investment market uncertainty. When investors anticipate downturns, inflation, or currency devaluation, they tend to shift towards gold. This behaviour increases demand and drives the price upwards.
During times of geopolitical tension or global financial instability, gold often retains its value when other assets decline. Investors who need to preserve capital in uncertain conditions frequently turn to gold as a hedge.
For Indian buyers, this means higher domestic gold prices during periods of global uncertainty, as demand for gold increases both locally and internationally.
Seasonal or Festive Spikes
Gold prices increase rapidly during the festive and wedding seasons due to a surge in demand. Gold holds cultural significance during various Indian occasions, which directly influences buying patterns and contributes to domestic price fluctuations.
For instance, during Durga Puja, gold prices in West Bengal may rise due to regional demand. However, the same trend may not apply to other parts of India, as Durga Puja is primarily celebrated in West Bengal.
Rupee-Dollar Equation
As India relies heavily on gold imports, the exchange rate between the Indian rupee and the US dollar plays a significant role in determining domestic gold prices. A weaker rupee against the dollar increases the landed cost of gold, making it more expensive for Indian buyers.
Conversely, a stronger rupee reduces import costs, which eases local prices. Since global gold prices are denominated in US dollars, fluctuations in the exchange rate directly affect the final price paid by Indian consumers.
Policy and Geopolitical Factors
The Indian government regulates gold imports through duties and taxes. Therefore, policies related to import and export have a substantial impact on price fluctuations. Increases in import duties or GST raise gold prices for consumers, whereas reductions lower the cost.
Gold Reserves
The Reserve Bank of India impacts gold prices through its management of gold reserves. When it purchases gold, the market supply reduces, causing prices to rise. Conversely, when it sells, prices may decline.
As per the World Gold Council (WGC), central banks acquired over 1,000 tonnes of gold in 2024, marking the third consecutive year of such acquisitions.
The report notes that total purchases reached 1,037 tonnes last year. It is thus one of the biggest years for gold buying by central banks. This will increase the demand in the market and as a result it will hike the price.
These changes in gold rates can create uncertainty in the buying process. One needs to stay informed about related news and monitor the latest gold rates to make timely and well-informed decisions.
Beyond being a valuable asset, gold also serves as a financial resource. You can use it as collateral for loans and gain access to funds without selling your gold. However, you need to use a gold loan calculator to determine your repayment capability.
Staying aware of these factors helps you understand how gold plays a crucial role in the global financial market. Several websites are available where you can check the latest gold rate. These platforms also provide location-based rates.
Compare the live rate with past rates to gain a clear understanding before making an investment.
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