India,
being one of the largest consumer of gold, holds more than 25% of the global
demand share and has been investing in gold long before the introduction of any
other sort of investment like mutual funds, stocks or bonds. Gold has also been
a spot on hedge against inflation and owing to its falling rates, investors are
keenly considering gold as an integral investment.

Also Read: Budget 2021: Gold, Silver to become cheaper as Centre reduces customs duty

According to Gold Outlook 2021, Gold was one of the best performing major assets of 2020. This value is determined by a number of factors like low interest rates, high risks and positive price momentum. 

With that said, here are a few factors that affect the gold prices and should be kept in mind by a potential investor.

Demand

Why gold enjoys humongous demand in Indian market needs no explanation, it stems from various reason like our cultural orientation to traditional investment practices which consider this a safe option. According to a study by World Gold Council commissioned by the World Gold Council and Federation of Indian Chambers of Commerce and Industry (FICCI), Gold in India is seen as both an investment and ornaments.

Relationship between Gold and Inflation

To understand this, we must know that inflation is inversely proportional to currency, i.e, the value of currency abates when inflation rates rises and at this time gold act as another form of money. Therefore, in times of extended inflation, golds acts as a hedge against inflation, pushing its prices in the period. 

Good monsoon

This may come as a bit of surprise but monsoon impacts gold demand. It is because 60% of India’s gold consumption comes from rural population who are dependent on good crops for there income. Effective crops in turn are dependent on monsoon and thus monsoon and gold are interrelated factors. Also, rural population is a staunch supporter of gold as a perfect investment.

Budget 2021

According to financial experts, gold and silver will be among the commodities to be available at cheaper rates from the financial year 2021-22 due to reduction in the customs duty on products of non-alloy and steel to a flat rate of 7.5% and 5% to 2.5% on copper by the central government in the Budget 2021. 

Disclaimer:

This content on Gold Rate predictions should be used only for reference & educational purpose. The Information provided may or may not be accurate or reliable for Investment & hence, should be used at one’s own risk