Gold prices have seen a sharp rise in India in recent times and a low level in the rest of the world. Earlier this year, India's domestic currency rose 23 percent. This increase is unprecedented; however, at last year’s prices, it saw a 25% leap. These two surges have made today’s gold prices unrecognizable since two years ago.
Today Gold Price
India may be one of the most influential, but it is not the only country looking at such growth. Internationally gold prices have peaked since the end of 2012.
In this article, we will try to explore this phenomenon and find out why this Consumer-Gold Rush is happening.
Why is gold valuable in the first place?
To understand why gold prices have risen so dramatically, we must first understand why gold is so valuable.
Unlike many new investment forms such as bitcoin or stocks in a company, gold has been worth thousands of years. Gold has all the qualities required for a precious commodity. It is very rare and always in short supply; Is delightful, and most importantly, gold never changes.
People have always found uses for gold, be it in the form of coins, jewelry, superscript crackers, or, more importantly, an asset. As science and technology progressed, mankind gained more and more uses for this material. Everything from the microprocessors in your device to some pacemakers has gold in them. Hence gold is different to most currencies in the world. Modern money is a fiat currency, which means that it only has value because society thinks it has value. Gold, on the other hand, is a self-contained commodity such as steel or petroleum; It is fundamentally useful material.
Considering these facts, it is easy to see why gold has always been a precious metal. Individuals and governments have also invested in gold for centuries. Gold is recognized as a fixed asset whose price is far from volatile and uncertain, although the rest of the market becomes volatile. This has made gold historically very attractive.
But if gold is supposed to be so stable, why do we see these huge spikes? To understand this, we need to know the various factors that created the exact storm.
The main reasons
First, pull the elephant out of the room. No, Covid-19 did not get full blame. The virus and its associated lock-downs have really helped push up gold prices, but this trend has been going on for a long time since before the epidemic. It is worth noting that the first rise in gold prices, which began in 2019, began months before the epidemic.
So what is blame? As mentioned earlier, there is no one specific factor that led to this increase, but rather, a series of events at the same time that caused the surge we are now seeing.
First, perhaps, inflation is the simplest factor. Recently, India has seen an increase in the inflation rate year after year. It went from just two and a half percent in 2017 to almost eight percent in 2019. Rising inflation means more monetary investment in the market in the form of cash. Such inflation periodically puts pressure on commodity prices. Gold is inseparable. It also has its price increase due to this inflation.
The second factor to consider is the relative destruction of the Indian rupee. India is the largest importer of gold in the world and one of the top importers of gold in the world. But to buy gold as good as it does in the international market takes dollars. Global gold prices are stabilized in the Used, and to buy gold, we also have to pay in the Used. The dollar exchange rate has risen negatively by 7% which means that every ounce of gold is now appreciating further against the rupee exchange rate.
The third issue to be investigated is the relationship with the Reserve Bank of India. Many national banks, including the RBI, stock gold as a strategic asset. Because gold always has value, unlike foreign currencies. The RBI has recently been expanding India's national gold reserves. Since the beginning of 2019, the RBI has added more than 41 tonnes of gold to its national inventory. For those who keep your account, it is one million ounces of gold. This has further increased the demand and led to the increase in prices that we see.
Finally, there is COVID-19. Prices may not have risen dramatically due to this epidemic. But the lockdowns and recession associated with Chowdhury-19 have pushed people to the brink. Citizens, organizations, and governments want to protect their wealth. In times of uncertainty, as now, all of these companies require a steady investment instead of a risky one. Therefore, instead of pursuing rewards by investing in companies or real estate, everyone is turning to gold.
This way the ending is not so easy. Gold is one of the most stable assets there; Not a single factor contributed to the instability we see today. Instead, many different factors work together, producing massive increases that we see before us.
0 Comments