Why Gold Price is Increasing?

Welcome to the world of gold - a timeless investment cherished for its stability and cultural significance, especially in India's jewellery market. This precious metal has held an allure for generations seeking to safeguard wealth and heritage amidst market fluctuations. 

It acts as a hero in the tale of investments -  a reliable hedge against uncertainty.

But unlike in King Midas’ story, its value continues to rise perpetually. Curious as to why this happens? Let’s delve into why so that you can consider this investment avenue!

Factors that Influence Gold Prices

Several factors explain why gold price increase or decrease. These may include - 

• Demand and Supply Dynamics

The balance between the demand and supply of gold is a key determinant of its price.

Gold is unique as it retains its value over time, and its scarcity contributes to its attractiveness.

The supply of gold mainly depends on the mining production of the same. An increase in demand for gold, driven by factors such as economic uncertainty or geopolitical tensions, can lead to a rise in its price, reflecting its limited availability.

• Inflation Hedge

Gold has historically served as a reliable hedge against inflation.

When inflation rates rise, traditional investments may struggle to maintain value, prompting investors to turn to gold as a safeguard. Its intrinsic worth remains unaffected by currency devaluation, making it an attractive option during periods of economic uncertainty.

• Interest Rate Influences

Gold prices and interest rates share an inverse relationship. Lower interest rates tend to make gold more appealing since it offers an alternative to low-yield investments. 

Conversely, higher interest rates can reduce gold's attractiveness as other investments become more profitable, potentially causing a decline in its demand and price.

• Cultural and Seasonal Trends

You might have often wondered why gold price is increasing rapidly during festivals.

It is because gold holds cultural significance in India, especially during festivals and wedding seasons. The heightened demand for gold jewellery during these times can lead to price surges.

Cultural preferences and festivities contribute to fluctuations in demand, impacting the overall price of gold.

• Government Actions and Reserves

Government policies, including the buying and selling gold reserves, can influence its price. Large-scale purchases or sales by governments can create ripples in the gold market.

The Indian government's decisions regarding gold reserves and transactions through the Reserve Bank of India (RBI) can influence price shifts.

• US Dollar Value 

Because gold is often bought and sold using USD everywhere, the dollar's value changes affect how much gold costs. When the dollar strengthens, gold prices tend to decrease, as it becomes relatively more expensive in other currencies.

Conversely, a weaker dollar often leads to higher gold prices due to increased demand from investors seeking a hedge against inflation and economic uncertainty.