Why Does Gold Price Fluctuate Often in the Market?
Gold has been considered an important monetary asset across the world for centuries. In India, we consider gold as a symbol of wealth and status. Indians are emotionally driven to gold(and gold price) as they have religious value and are also used as a wealthy product during weddings and other occasions. People also consider gold as a perceived investment that helps them to recover their financial crisis instantly.
The price of gold is fluctuated by the investors behavior. Yes, many investors think of gold as an inflation hedge while the supply of gold remains constant. Gold is a commodity which is traded in the commodity market. If you are a beginner to commodity trading, it is recommended to get expert guidance from a trusted brokerage firm like Goodwill. They have been a key player in the stock market for the last decade and help you to choose the commodity based on your requirement.
Now, let’s have a look at the factors that affect the gold prices in India.
Demand & Supply:
As we all know if the supply of the product is less, the demand of the product in the market rises and this increases the price of the product. Gold is one of the commodity that is always in demand and hence demand and supply plays an important role in determining the price of gold.
If the value of the currency goes down during the time of inflation, people hold on to their gold-assets. This is because gold plays an important role in hedging against inflationary conditions. Thus, at the time of inflation the price of the gold rises in the market.
Safeguard Against Volatility:
In India, people buy or invest in gold to safeguard them from volatility or unpredictable economic crisis. They think relying on gold assets is a safe heaven as investors would be concerned to buy gold even if the domestic economy is growing or in recession.
In India, the purchase of gold is mostly done from rural places. During the season of monsoon, if the cultivation is good and yields a great amount of profit, the farmer would invest their savings in gold. On the contrary, if the monsoon is deficient, the farmer would sell the gold-assets to generate funds.
Impact of Dollar-weakening:
Gold and the dollar share an inverse relationship and the rupee-dollar equation also has a role to play in the Indian gold rates. In India, gold is largely imported and if the rupee weakens against the dollar, therefore, the demand for gold increases which rises the price of gold. If the price of the dollar falls, the value of other nation’s currencies would gradually increase. This would result in a rise in the gold price as the demand for the commodity increases in the market.
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