Why is Gold Price Rising in India?

According to the World Gold Council, Indian household has around between 24,000 to 25,000 tonnes of gold. India's central bank RBI had purchased 40.45 tonnes of gold in the financial year 2019-20, which has now has a total reserve of 653 tonnes. Let us know in this article, why is the price of gold increasing in the country despite the huge storage of the Gold in India?
Jul 29, 2020 13:50 IST
Why is Gold Price Rising in India?
Why is Gold Price Rising in India?

There was a time when India was known as the 'Golden Bird' but the truth is that India is still a 'Golden Bird' because it is the second-largest gold consuming country in the world.

Indian households and religious institutions have this much gold that it can be a matter of jealousy for any country.

According to the World Gold Council, Indian households have a gold reserve around 24000 to 25000 tonnes. Gold kept in religious institutions of India has not been included in it.

The world Gold Council has estimated that the Sree Padmanabhaswamy Temple in Thiruvananthapuram has a gold reserve worth US$ 22 billion. All the temples of India have a gold reserve of 4000 tonnes.

India's central bank RBI had purchased 40.45 tonnes of gold in the financial year 2019-20, so the total gold reserve of RBI has touched 653 tonnes.

Let us know in this article, why is the gold price rising in India? 

An estimation done by the World Gold Council says that the demand for gold in India fell 36% between January-March quarter of this year to 101.9 tonne due to coronavirus-induced nationwide lockdown, volatile prices, and economic uncertainties. and.

But from March 2020, people started looking for alternatives to the equity investment and purchase of house and saving schemes.

The price of gold in March 2020 was Rs. 42,200 per ten grams, which has increased to Rs 52000 per ten grams in July 2020.

In July 2020, the price of 24-carat gold in Chennai has reached Rs 53,490 per 10 grams. Apart from this, the average price of gold is above 50 thousand per 10 grams in almost all the big cities of the country.

Now the question arises why the price of gold is increasing in India currently,

1. Safe investment Tool: It is seen that when the Sensex falls, the price of gold starts increasing. The reason for this is that people do not trust the uncertainty of the stock market and they find gold as a safe mode of investment.

Investing in gold is considered to be the safest because there is not a very big fluctuation in its prices and it keeps on giving a fixed return to the investors.

2 . Low-Interest Rate in the country: The rate of interest on most of the saving schemes in the country like savings account in banks, Post Office Savings Account, Kisan Vikas Patra (KVP), Public Provident Fund (PPF), Sukanya Samriddhi Yojana, National Savings Certificate and fixed deposits, etc. have decreased in recent time. 

That is why people are buying gold by withdrawing money from these investment instruments, due to which the demand for gold is increasing and its prices are following.

3. Traditional Demand: There is hardly any marriage in India where gold is not used. So the traditional demand for gold has contributed to the price hike of the gold. People are buying gold for the marriage season starting in December month.

4. Gold is Inflation Proof:-Investment in the gold is considered a hedge against inflation. Due to COVID-19, prices of many things have increased, due to which people fear that inflation may increase in the future, so it's better to invest in gold.

5.No Liability on the investors: Gold does not increase any kind of liability, it’s highly liquid, gold is a reserve property, and it is considered a status symbol. Due to these reasons, the demand for gold is always in India.

Thus it is clear that uncertain market, decreasing market interest rate, and insecurity in the share market are major factors behind the rise in the price of the gold in India.

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