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What factors typically impact gold prices?

By Finserv MARKETS - Aug 2,2019
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What factors typically impact gold prices?

Gold is a very common asset which most households in India hold onto for years. It is adjudged to be an investment, that too a very valuable one, and is regularly purchased on certain days in the year that coincide with festivals. Gold is also a metal that is traded up on in the commodities market, and thus, its price fluctuates on a day-to-day basis. Similar to other products listed on the commodities market, the price of gold is dependent on the demand and supply of the material itself as well as a host of other factors.

The Digital Gold functionality, available on Finserv MARKETS, allows you to invest in gold from the comfort of your own home. You can sell and buy the gold, and also have it redeemed in the form of physical gold bars or coins that will be delivered straight to your doorstep. While investing in gold on the commodities market involves a lot of work, especially in terms of hiring a bank and trader, a Digital Gold account on Finserv MARKETS can help you easily take charge of your own transactions.

However, as with all commodities, you need to keep yourself abreast of market developments when you invest in gold. Demand and supply mismatch is the reason behind fluctuating prices of the metal. Read on below to learn about a few factors that can impact gold prices in the market by affecting the demand and supply balance of the metal.

  1. Demand for jewellery: As mentioned above, Indian festivals mandate buying gold on certain days in the year. Aside from this, there is also a very high demand for the yellow metal during the wedding season, which leads to a mismatch in demand and supply; causing prices for the metal to shoot up. India is one of the biggest importers of gold as it is used prominently by industries as well to manufacture specialised products.
  2. Gold reserves held by the Reserve Bank of India (RBI): Central banks of all countries hold a certain level of gold reserves, which help control the price of the metal in domestic markets. The price of gold shoots up when these central banks start procuring more gold, in a bid to further increase their reserves. While the supply of gold in the market drops, the flow of cash to the market is on the rise.
  3. Rates of interest in the market: The current price of gold is generally a good indicator of the rates of interest that are currently being followed in the market, as interest rates on financial products and services are closely tied up with the demand for gold. When the rate of interest increases in the market or country, customers have a tendency to sell gold in order to gain cash. This surplus supply results in the price of the metal falling. Alternatively, when interest rates in the market are on the lower side, customers tend to buy more gold which pushes demand up and thereby increases price for the metal. Invest in gold via Finserv MARKETS, where the online portal for the Digital Gold you purchase will keep you updated on markets in real-time, allowing you the freedom of making an informed decision on whether to buy or sell gold from the comfort of your own home.
  4. Inflationary causes: Gold is considered to be a much steadier investment than currency or any other securities for that matter. As a result, it is used to hedge inflation by investors who prefer to hold gold over currency. Thus, demand for gold from customers rises when the market is facing high inflation leading to an increase in its prices. The impact on gold prices from inflation refers to both inflation that occurs on a global scale, as well as the inflation that happens internationally.
  5. Global movement: Since India is one of the largest importers of gold, any shift in its global prices also affect prices at home. With global movement in the price of gold, there is a change in the import prices as well leading to a change in its prices in the domestic market as well. While the value of financial products falls during political upheavals, gold is considered to be a secure investment and is thus called the “crisis commodity”. Demand for gold often rises during political chaos, leading to an increase in its prices at such times as well.

Invest in gold after studying all of these factors very commonly, because they are subject to change on a more or less daily basis. With a Digital Gold account on Finserv MARKETS, you can afford to avail benefits of buying and selling gold at the click of a button. Selling and buying gold online helps you cut out on unnecessary costs like making charges, and fees for sellers and for storage that you would have incurred while performing the same operation offline.

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