Gold is a very popular asset in India. People consider buying the yellow metal for making jewellery or investment.

Gold prices on Wednesday tumbled by Rs250 to trade at over a five-month low of Rs30,800 per 10 gm amid weakening global trends and a considerable fall in demand from local jewellers, PTI reported.

A look at some of the factors that impact the gold price.

US dollar value

Since gold is priced in US dollars, currency movements have a big impact on the price of gold. A strong dollar means low gold prices and a weaker dollar raises the price of gold.

Inflation

Studies have revealed that inflation is one of the leading indicators to predict the price of gold.

Jewellery market

The jewellery market plays an important role in gold prices. Many Indians choose the festival season for buying gold and prices rise due to demand.

Interest rates

Rates of interest on bank deposits also impact the price of gold. Increased interest rates simply mean that people will sell their gold to put their money to better use. A lower rate of interest translates into more cash, and more capacity to buy gold.

Supply and demand

Supply and demand can influence physical gold prices. An increase in demand with constrained or low supply has a tendency to pull up the price of gold. Conversely, oversupply with stagnant or weak demand can push gold prices lower.

Also Read: Bitcoin is more like gold than a currency

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