Factors That Influence Gold Rate In India

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Used not only in the form of jewellery for adornment but also as an investment, gold shares a deeply embedded bond with the Indian market. For Indians, it is the safest form of investment that can be liquefied anytime. A savior during financial crisis, gold also has great sentimental value in our culture. It is used during festivals, weddings, and all special occasions. Although the demand for gold remains high in India, the prices of gold do not always meet customer’s expectations. Here are a few important factors that affect gold prices in India, knowing which shall help you decide when to invest in gold-


Inflation leads to weakening of the domestic currency, compelling people to invest in gold. This not only increases the demand but also the price of gold. This holds true for both international inflation as well as the inflation that occurs in India. Owing to its almost steady character, gold holds significant value and is used to hedge inflation.

Interest Rates

Another factor that determines the price of gold is the rate of interest on bank deposits and financial instruments. Interest rates and gold share an inversely proportional relationship with each other. An increase in interest rate implies that people will sell their gold for putting their money to better use. A lower interest rate, on the other hand, translates to better cash availability and more capacity to purchase gold.

Jewellery Demand

The Indian jewellery market is pretty diverse. Buying gold jewellery is a common tradition during festive events such as Diwali or Akshaya Tritiya and wedding season during the winters. Owing to an increased demand for gold, the prices of gold go up. The increased demand is also the reason why the country ends up importing gold during such events.

The Central Bank’s Decision

The Central Bank holds massive gold reserves in addition to currencies. Gold reserves must be sold off by the Reserve Bank of India when the economy is booming. When the Central Bank decides to hold gold, the prices of gold automatically shoot up. This is because of the increased availability of cash and a decreased supply of gold.

Socio-Political Situation

Similar to the global scenario, gold prices in India too are affected by the socio-political situations. Investors shift to gold investment if any risk is witnessed in other derivatives, owing to the poor socio-political conditions within the country. Gold is considered a safe haven during such situations.

The Bottom Line

There are a lot of factors that determine the price of gold in India. When making an investment decision, consider only the best gold loan company in India.


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