Gold prices are more or less due to these reasons

 

Gold prices have seen considerable fluctuations in recent times. Actually, there are many reasons for the fluctuations in gold prices but there are two main reasons for this. In this, if any emergency situation arises, then prices start rising. For example, gold prices in COVID-19 pandemic are at record levels. The reason for this is that gold is always considered a safe asset. Second, if everything is correct, then its prices are normal. This is seen before 2019. There are five reasons which have more impact on gold prices. Gold has been an important part of the cultural needs of Indian customers in a family or religious festive atmosphere in the country. Gold has always been a favourite as a physical asset. There are six reasons for this.

 

Economic uncertainty: When a crisis triggers an economic crisis, it usually affects the equity market, global trade and the financial ecosystem. Market volatility is created due to fluctuations in supply and demand. This uncertainty forces investors to diversify their investment portfolios. Because they want to protect their finances. In such a situation, people like gold the most. Likewise, the current COVID-19 crisis has caused economic havoc across the world. The price of gold in the country increased by more than 11 per cent in April itself. Gold prices had risen from Rs 37,000 to Rs 54,000 per ten grams in a period of 6 months.

 

Rising Income: The Indian economy has grown by leaps and bounds in the last few decades. This has increased the income of the middle class. This has also increased their spending power. Since India is one of the largest customers of gold, the purchase of gold has also increased due to increasing income. With rising income, people want to invest in and buy gold asset class. According to the recent World Gold Council, if there is a slight increase in income, then the price of gold starts increasing because people want to protect the increased income.

 

Inflation: To counter the economic downturn, governments often announce multi-billion dollar stimulus packages to increase liquidity in the economy. This makes people spend extra. However, many people secure their finances through investment in gold. Trends in the last two decades suggest that gold prices have risen after the global economic crisis. Apart from this, it has also been shown that gold also prevents inflation. Because scared investors often curb the effects of inflation through investments in gold exchange-traded funds (ETFs), sovereign bonds and the asset class of gold in general.

 

Government policies: Government decisions affect the price rise in gold prominently. When the Reserve Bank announces its interest rates and fiscal policy, sovereign bonds, etc., it has many effects on the market, which can move prices up or down. For example, in times of crisis the financial bailout package, the tax policy on the property, and other policy decisions are entirely the governments. Such decisions are often taken in view of the economic crisis.

 

Population and Demographics: Demographic dividend of India is often talked about as a dividend and is described as a boon for the country. With the belief that it can help create growth opportunities. More than 50% of our total population is under 40 years of age. Institutions expect changes in the spending patterns of Millennials and young professionals. The expectation is that they will invest in the asset class of gold rather than whether they will buy it as a physical asset or in some other way.