Gold prices could rise to Rs 85,000 per 10 grams and potentially even touch Rs 90,000 if geopolitical tensions and global economic uncertainties persist

metro india news  I hyderabad

Gold is very much an integral factor of Indian household economy. And the news is that Gold prices in the country will rise further up in the months and years to come! Gold possesses inherent value due to its scarcity and historical significance. Throughout history, societies have esteemed gold for its aesthetic appeal and rarity, utilising it as a medium of exchange and a representation of wealth. 

The gold standard prevailed until the 20th century and substantiates its monetary importance as a backing for currencies. Today, gold maintains its significance as a global store of value and a hedge against economic volatility. Its unique properties also make it essential in various industrial applications, such as electronics and aerospace. The appeal of gold, combined with its scarcity and diverse utility, continues to support its value

Gold prices in India are expected to rise further due to various factors. One major reason is the increasing demand for gold, particularly during festivals and wedding seasons, which puts pressure on prices.  Additionally, global economic uncertainties, inflation concerns, and geopolitical tensions contribute to the rising demand for gold as a safe-haven asset .

Key Factors Contributing to Rising Gold Prices

Weaker Dollar: A weaker US dollar makes gold more attractive to investors, leading to higher demand and prices ².

Interest Rate Cuts: Lower interest rates reduce the opportunity cost of holding gold, making it more appealing to investors ².

Inflation Concerns: Gold is often seen as a hedge against inflation, so rising inflation concerns drive up demand and prices ¹.

Central Bank Purchases: Central banks' gold purchases can influence prices, and India's central bank has been actively buying gold ².

Impact on Indian Economy

Rising gold prices can have both positive and negative effects on the Indian economy. On the one hand, higher gold prices can increase the value of India's gold reserves and boost government revenue through import duties. On the other hand, rising gold prices can widen India's current account deficit and put pressure on the rupee. Overall, it's likely that gold prices in India will continue to rise due to a combination of domestic and global factors.

Factors that Influence Gold Prices

Several factors explain why gold price increase or decrease. These may include Demand and Supply Dynamics The balance between the demand and supply of gold is a key determinant of its price. Gold is unique as it retains its value over time, and its scarcity contributes to its attractiveness. 

The supply of gold mainly depends on the mining production of the same. An increase in demand for gold, driven by factors such as economic uncertainty or geopolitical tensions, can lead to a rise in its price, reflecting its limited availability.

Inflation Hedge

Gold has historically served as a reliable hedge against inflation.When inflation rates rise, traditional investments may struggle to maintain value, prompting investors to turn to gold as a safeguard. Its intrinsic worth remains unaffected by currency devaluation, making it an attractive option during periods of economic uncertainty.

Interest Rate Influences

Gold prices and interest rates share an inverse relationship. Lower interest rates tend to make gold more appealing since it offers an alternative to low-yield investments. Conversely, higher interest rates can reduce gold's attractiveness as other investments become more profitable, potentially causing a decline in its demand and price.

Cultural and Seasonal Trends

It is because gold holds cultural significance in India, especially during festivals and wedding seasons. The heightened demand for gold jewellery during these times can lead to price surges.Cultural preferences and festivities contribute to fluctuations in demand, impacting the overall price of gold.

Government Actions and Reserves

Government policies, including the buying and selling gold reserves, can influence its price. Large-scale purchases or sales by governments can create ripples in the gold market. The Indian government's decisions regarding gold reserves and transactions through the Reserve Bank of India (RBI) can influence price shifts.

US Dollar Value 

Because gold is often bought and sold using USD everywhere, the dollar's value changes affect how much gold costs. When the dollar strengthens, gold prices tend to decrease, as it becomes relatively more expensive in other currencies. Conversely, a weaker dollar often leads to higher gold prices due to increased demand from investors seeking a hedge against inflation and economic uncertainty.