This is a question that has been asked widely across the globe. And like all other financial assets, several factors have a bearing on gold prices. Indian Investors have long been enamoured by gold and the price of the metal has increased substantially over the past 50 years. But what exactly drives up the metrics such as gold rate today Mumbai or Bangalore? It’s not just the tradition and culture, or even the oil and the war that drives its price up; it’s all of them – plus more. There are many elements that, together, determine its price as it is a commodity and a currency. Below are some of the major factors that contribute to shifting its price:
- Inflation led price rise of gold
Inflation is considered the main factor that influences the price of gold. It is the main reason behind people showing a preference for investing in gold. Several factors affect inflation, which includes high national debt levels, export surpluses, fiscal deficits, global demand and supply, global economic growth rate, and so on. However, when there is inflation people tend to invest in gold to keep the value secured. This demand and increased buying of gold, in turn, leads to a rise in prices of gold.
- Depends on other assets
With an eye on the future, economists are turning to hard assets, including precious metals like gold, which have traditionally been the choice of investors facing low sentiment in the stock market. Many top investment giants, such as Warren Buffett and Marc Faber predict that commodities are a way of getting back out of the financial crisis. When it comes to gold, some economists believe that with other asset classes like real estate and stocks affected by macroeconomic factors, investing in gold is a much safer option for investors looking ahead.
- Geopolitical factors
Want to take advantage of the global crisis? Then you should buy gold. Whenever there is a risk that an international crisis may lead to an escalation of geopolitical dangers, the demand for gold usually increases, which in turn continuously pushes the price higher. These factors could also impact the daily gold prices. Hence in times of an important global event you can see the effect in gold price today Agra or Kerala. Click here for more info.
- Consumption demand
An increase in consumption demand typically increases the price of gold like any other product. The reasons people buy gold vary. To some, it’s an investment and a hedge against inflation; to others, it’s a symbol of wealth or marriage, with the logic that you can use cash for daily expenses but will always need to wear something valuable for special occasions. Another important factor that impacts the consumption demand for gold is the income of the consumer; Consumer’s disposable income is the most important factor in driving the consumption demand.
- Interest rates
Gold prices and interest rates tend to move in opposite directions. When someone wants to borrow money, they look at interest rates. When interest rates increase, people tend to save more. This reduces the amount of money used for spending on goods and services including gold.