5 Major Factors That Influence Gold Prices In India

Gold investment is one of the most profitable investments

. Gold trading involves fewer complications hence even budding investors with a little knowledge about investments can venture there. After a few months rest, gold prices in India are really rising. Gold sector in India is likely to be on the rise for the rest of the year. Although gold rates always end up on the higher side what causes such fluctuations in these rates, is always a mystery to the investors with a little insight about economic scenario. There are a lot of local and international scenarios that might result into situational hike in the price of gold.

Top 5 reasons for gold price rise in India

Here are the top 5 reasons why the price of gold in India is likely to stay on the rise for more financial years to come:

1.Unstable economy: World economy is going through a tough time. A lot of experts claim that it is the worst economic phase in the world since the Great Depression. Service industry, government sector, IT industry and commercial sectors in India are going through financial crisis. When the financial crisis increases, people look for stability and better financial response. Most of them go with gold investment, which offers both security and high profits.

2.High inflation: Gold trading is in a great demand along with increased rate of inflation. Inflation affects market and world economic conditions. Instability in the rate of inflation means unstable financial conditions. When the market conditions worsen with high inflation, people look for security and stability. Inflation highly affects the rate of physical gold and gold stocks.

3.Demand-supply: There should be a balance between the demand and supply of the things including gold and gold rates. When there is a slight imbalance with both these factors, it increases gold prices in India. Gold sector is struggling with a huge drift between the ratio of demand and supply of gold. This deficit has resulted into increased gold prices in India and other countries like America, China and Russia.

4.Unstable dollar: Similar to the United States of America, its currency plays a crucial role in stabilizing world economy. Value and position of the US dollar not only deflects on the value of Indian national currency but also causes instability in the gold sector. When the value of US dollar increases, gold prices increase. When the prices of the US dollar decrease, the gold prices reduce. This fluctuation creates instability in gold market, causing an atmosphere of fear and insecurity.

5.Interest rates: Overall interest rates affect the world economy. It also affects the gold prices. Interest rate signifies numerous market factors including returns of investments, bonds, real estate, stocks and equities. When interest rates are reduced, the market and investors start searching for compensation. Compensation is needed to negate the risk factor and create a strong cover for inflation in future. Such scenarios force people to look for stable investments. Gold investment increases when there are low interest rates.

by: lindadale

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