Why Gold Prices are Increasing in India : Reason Behind Gold Rate Increase | Digital Gold Investment
If we talk about Gold then in 2019, Gold prices used to be at Rs 30000. As of now, Gold has crossed over Rs 50,000. In terms of percentage, Liquid gold price has increased by 60% in the last year. What happened in the last year which caused the rise in price and the reasons behind it.
Should you still invest in Gold or not and what are options available to invest in Gold?
Many people say they have stopped buying gold as the prices have risen a lot. In the Indian market, people have reduced their making of gold jewelry still why is the price not coming down? Still, the price is rising up. So are there other reasons except for the jewelry making which impacts the gold prices.
People have this misconception about Gold that even when lesser jewelry is been made, why is the price going up? We will try to get rid of that misconception and explain what are the other reasons except for jewelry making which impacts the prices directly or indirectly?
You know, Gold as an investment is very important in different parts of the world. In developed countries, gold is not used as much for jewelry as much as it is used for investment like I have told you many a time that while investing, you must diversify your portfolio. Diversification means you invested a part of your money in equity, debt and many people in order to hedge their positions. So that if the market goes down then their whole portfolio should not go down. Normally it is said that when there is fear in the market. Many investors start taking their money off equity, debt and putting it into gold.
You might have seen from the time COVID started, Gold prices started going up heavily cause, whenever there is uncertainty in the market and share market might go down but Gold won't go down cause Gold is considered to be a stable investment option. People use it to diversify and when there is uncertainty in the market like we saw in the last few months. From the time COVID started, Gold prices started rising up but after that, the prices stabilized for a bit cause people felt during the recovery after coronavirus will start immediately once its over. But the lockdown has been on since a long time cause of which economic activities completely stalled. After which people started thinking that the economic recovery after this will take time cause of which people felt Gold can be a good option for investing the cause of the assumption that gold is safe as it is believed whenever there is uncertainty, Gold is considered as a good investment option. When investors start getting attracted to Gold then Gold prices automatically starts going up
This is a normal supply and demand game. Supply would not have increased by much in recent times but demand would have increased in lockdown cause everybody started investing in gold suddenly cause of which gold prices started going up. Thus the primary reason for the rising prices, uncertainty and fear in the market to invest in other options due to which people felt gold can be a good investment option and as people started buying gold. Due to the demand and supply mechanism, the gold prices started going up.
This is a normal supply and demand game. Supply would not have increased by much in recent times but demand would have increased in lockdown cause everybody started investing in gold suddenly cause of which gold prices started going up. Thus the primary reason for the rising prices, uncertainty and fear in the market to invest in other options due to which people felt gold can be a good investment option and as people started buying gold. Due to the demand and supply mechanism, the gold prices started going up.
The relation between Gold and Interest rate :
When the interest rate goes down, how does the gold prices go up? You might know, when there is a slowdown in the economic activity of any country, the central bank there starts to reduce the interest rate cause it is believed that the capital can be used to infuse extra in the market and economy cause of which economic expansion starts happening.
From the start of COVID in order to tackle the economic condition, the central banks have reduced the interests and many countries reduced their invest rate by a huge margin which made many people thought that gold might be a very good investment option cause gold is still giving good returns to its investors. So normally when the interest rates of any country start going down, the gold prices start rising up.
Gold is considered to be a good inflation hedge, if you have invested in gold then then you don't have to be afraid of inflation. Normally when there are uncertainty and fear in the market, the interest rate starts going down. All countries start printing extra currencies and cause of this the currency value trades down thus countries inflation starts rising and in this situation, for inflation hedge gold is considered a good option. Gold is a good inflation hedge option cause of which investors had started getting interested in it and cause of which gold prices are continuously rising.
There is uncertainty from the economic perspective cause of which cause of which Gold prices went up but if we talk about Geo-Political situation then as you know, there have been tensions between many countries, US-China, India-China among others. When the geopolitical relations are at risk, investors start getting panicky cause investors feel if there is any problem at the geopolitical level, the share market won't perform well, investors feel economic activities won't expand well and when the geo political tensions increase as we have seen in the past then the investment in gold increases as Gold is considered as a safe investment option. It is believed that the gold doesn't get impacted comparatively than other investment options cause of investors start getting attracted to gold and the prices start getting increased.
Experts say till there is uncertainty in the economic conditions and at geo-political stage till then the gold prices will keep increasing, By how much more it will increase, nobody knows. You can research on gold and decide on investing in it. We cannot tell whether the price will increase or decrease but gold can always be a good investment option in your portfolio thus you must think of investing from the point of view of your portfolio. One small portion should be for equity, another for debt and a portion for other assets investment and you can make a small investment in gold.
By investing in gold, you can take benefit of diversification and when the share market goes down, it is believed that the gold prices will go up.
From the start of COVID in order to tackle the economic condition, the central banks have reduced the interests and many countries reduced their invest rate by a huge margin which made many people thought that gold might be a very good investment option cause gold is still giving good returns to its investors. So normally when the interest rates of any country start going down, the gold prices start rising up.
Gold is considered to be a good inflation hedge, if you have invested in gold then then you don't have to be afraid of inflation. Normally when there are uncertainty and fear in the market, the interest rate starts going down. All countries start printing extra currencies and cause of this the currency value trades down thus countries inflation starts rising and in this situation, for inflation hedge gold is considered a good option. Gold is a good inflation hedge option cause of which investors had started getting interested in it and cause of which gold prices are continuously rising.
There is uncertainty from the economic perspective cause of which cause of which Gold prices went up but if we talk about Geo-Political situation then as you know, there have been tensions between many countries, US-China, India-China among others. When the geopolitical relations are at risk, investors start getting panicky cause investors feel if there is any problem at the geopolitical level, the share market won't perform well, investors feel economic activities won't expand well and when the geo political tensions increase as we have seen in the past then the investment in gold increases as Gold is considered as a safe investment option. It is believed that the gold doesn't get impacted comparatively than other investment options cause of investors start getting attracted to gold and the prices start getting increased.
What are the experts take on if the Gold prices will keep increasing in the future as well :
By investing in gold, you can take benefit of diversification and when the share market goes down, it is believed that the gold prices will go up.
How you can invest in Gold?
There are other ways as well to invest in Gold, like in Gold Mutual Funds, these mutual funds invest in gold. Other than this, there are ETFs, Exchange Traded Funds, from which you can take exposure in Gold. So, Gold can be a good investment option and many investors invest in gold and keep.
Again I would like to say gaze your own risk and analyze your portfolio and invest in gold for diversification.
This was all for educational purposes only, we just wanted to clear out your misconceptions that for the rise in the price of gold, jewelry is not the only reason. Other than this there are many investors who invest in gold. As an investor, think about how is gold a good investment option for you, analyze your risk and in which ways you can invest in gold?
Again I would like to say gaze your own risk and analyze your portfolio and invest in gold for diversification.
This was all for educational purposes only, we just wanted to clear out your misconceptions that for the rise in the price of gold, jewelry is not the only reason. Other than this there are many investors who invest in gold. As an investor, think about how is gold a good investment option for you, analyze your risk and in which ways you can invest in gold?
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