Let’s begin with a fun question, what is that one thing you find commonly in weddings and festivities? Among a hundred guesses, there would surely be gold. Gold has been vital in Indian culture for centuries, whether in weddings, festivals or Indian folklore. The picture is not going to change anytime soon. In other words, gold has been a precious metal and will continue to be for years to come.
Interestingly, gold is also becoming a popular investment option these days. It’s not like it wasn’t an investment option before; however, now multiple forms of gold are emerging for the point of investment – be it gold ETFs or gold sovereign bonds.
Whatever the reason you have for purchasing gold – for personal, social or investment purposes, it is essential to note that gold investments depend on the gold rate today.
Now, this might be something that you would already know. But did you know gold rates change every day and differ from city to city?
The question that follows is why? Why does the gold rate today keep on changing? Well, there is no one reason, but several. Several factors affect the gold rate today.
In this guide, we will be discussing those factors. So, stay tuned and read along.
Factors Affecting the Gold Rate Today
- Demand and Supply:
This does not only apply to gold but almost every other commodity that witness price fluctuations frequently. The demand and supply of a commodity affect its prices. Likewise, the gold rate today changes according to the demand and supply of the metal.
With the increase in demand, the gold rate today also increases – the definite reason why the gold rate today skyrockets during festivities and wedding season when the demand for the metal shoots significantly. That’s why most investors do not suggest buying gold at this time of the year.
As for supply, it is affected by the purchasing pattern of RBI. The governing body of the financial system in India holds gold reserves. So, when it begins to buy more gold, the supply is affected, ultimately increasing the gold rate today.
- Rupee- Dollar Equation:
Gold is not mined in India; it is imported from other countries. Consequently, any change in the foreign exchange, i.e., the price of the rupee against the dollar, significantly affects the gold rate today.
Ergo, if the Indian rupee weakens against the US, the gold price would appreciate in terms of the rupee. In simple words, with the fall of the rupee value, the exchange rate increases. With it, the gold rate today in India also rises.
However, it is crucial to note that any fluctuation in rupee-dollar rates would not affect the US gold rates.
It is perfectly okay to be surprised to realize that seasons also affect the gold rate today. Monsoons, in particular, affect the gold rate today in India – thanks to the rural consumption of gold in the country. 60% of the demand for gold in India comes from rural India. When farmers in rural India receive a good harvest because of good monsoons, they begin investing in gold assets, contributing to the increased demand for gold.
- Tax and Customs Duty:
As gold is imported into India, several taxes and customs duties need to be paid. Any change in the fees and customs duty significantly affects the gold rate today. A change in the rates of taxes and duties results from policy changes implemented by the Indian and foreign governments. If there is a rise in taxes, the gold rate today also increases with it.
- Transportation Costs:
Once gold is imported into India, it needs to be transported to multiple cities, giving rise to transportation costs. As distances vary between cities and places of import of gold, the gold rate today also varies from city to city.
In addition to the transportation costs, several other expenses are incurred to ensure smooth transportation and the storage of gold, adding up to the costs. Akk the reasons why the gold rate today is different for every city.
- Jewellery Associations:
Every city has its local gold association. This association comprises leading jewellers from the time who come together and decide the gold rate today according to several factors discussed above. After the gold rate is collectively decided, all the local jewellers sell gold at a uniform rate across the city.
Even though you are now aware of the primary factors that affect the gold rate today, it is still not possible to accurately speculate gold prices in India. However, given the history and recent gold trends, it would be safe to say that the gold rate in India would only rise. Its demand will not see a significant dip for years to come.
If you do not have jewellery needs, digital gold can be a great investment avenue. If you are planning to do that, you might need a trading account. For that, KYC (Know KYC meaning here) might be necessary.
So, follow the steps of finding a broker, register with it and begin your gold investment journey in gold ETFs or SGB now!