Gold Rate: Determining the Gold Rate, Factors Affecting Gold Price

We Indians love gold and have a tradition of buying gold on various auspicious occasions such as Diwali, Dhanteras and Akshaya Tritya and is preferred form of jewellery for weddings and other functions. During these festivals market is crowded with customers. Generally customers spend hours on selecting a particular design but alas have little or no knowledge how gold rates are determined and hence believe the seller blindly. Gold rate varies from jewelers to jewelers and from cities to cities. The rates are determined by every cities jewelers association every morning. So it becomes important for customers to know how gold rates are determined.

Determining the Gold Rate

India being the consumer of gold as against producer, the country relies on imports to fulfill its gold demand. London Bullion Market Association (LBMA), the global authority for precious metals, manages the London Good Delivery List. The LBMA gold rates are published daily at 10:30 AM and 3:00 PM UK time (i.e. at 3:00 PM and 7:30 PM as per Indian Time), by ICE Benchmark Administration in US Dollars.

In India, The Indian Bullion Jewelers Association (IBJA), takes into consideration the international gold price and adds applicable taxes. Gold is traded every day and demand, supply and other factors determine the gold rate. Although gold rates are published in almost all newspapers and website, the gold rates are not same everywhere, because gold price would depend from whom the jewelers are buying and at what rate are they procuring the gold.

Factors Affecting Gold Price

1) Currency Fluctuation: Gold is traded internationally, and gold rates are published daily twice in US dollars. So any change in US dollar and Indian currency, will directly affect the gold rates.

2) Taxes: India being importer of Gold, import duty is being levied on Gold. Increase in import duty will increase the gold rate. The custom duties have increased to 12.5% from 10%. GST is also levied at 3%. Thus, we forget to notice but a major component of gold price is actually composed of taxes.

3) Financial Uncertainty: Gold is often considered to be safe heaven, and hence during financial uncertainty, investors prefer investing in gold. And hence demand of gold increases during such period and hence gold price is affected. Similarly, when the markets are high, the demand of gold falls as people prefer to invest in stocks. In such a case, the demand for gold falls and thus, the prices of gold will be adversely affected.

4) Interest Rates: When interest rates are low, investors don’t prefer in fixed income investments. They would invest in gold and in case interest rates are high, investors would invest in fixed income investments and demand for gold would decrease affecting the gold price.

5) Purity: Price of gold depends on its purity. 24 KT gold will have different price than that of 22 KT gold.

Trend of Gold in India in the Month Wise 2020

24 Carat Current Gold Rates

Months Lowest Price Rs. per 10 grams Highest Price Rs. per 10 grams
June 2020 45,620 47,100
May 2020 45,300 47,600
April 2020 41,670 47,150
March 2020 40,200 44,320

Thus, we can see how volatile gold market is and how it continuously keeps changing.

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