As we all know that International Gold is Denominated by Dollar. Both are having an inverse relationship in terms of price. So any kind of fall in dollar prices leads to an increase in gold prices and vice versa. The inverse relationship is because Firstly if there is any kind of fall in dollar prices it will increase the value of currencies of other countries and will automatically increase there purchasing power which increases the demand of all the commodities including gold and its price also.
Top 5 Factors that are Affecting Gold Prices In India
Demand For Gold in India is Interlinked with culture, tradition and the desire for beauty and the Purpose of Investment in a Commodity. According to a study by the World Gold Council commissioned by the World Gold Council and Federation of Indian Chambers of Commerce and Industry (FICCI), Indian consumers view Gold as an Investment and Lifestyle. When asked why they bought gold, almost 77 percent of respondents cited safety of investment as a factor, while just over half cited by gold with the purpose of there lifestyle, Status, and adornment
2.USA and China Trade War
Recently, Due to the US and China Trade war, the prices of the dollar is falling and gold is denominated by dollar and both of them are having an inverse relationship in terms of price as I mentioned in the first paragraph
3.Relation Between Inflation and gold
Due to any reason if inflation rises the purchasing power of money decreases, therefore, people tend to hold money in the form of gold. So as a result when inflation remains high over some time in an economy people start buying gold as a tool to hedge against the inflationary conditions. Which further leads to a rise in prices of gold
4.Increased Central Bank Purchases
One of the major reason why gold prices increased in the quarter of 2019 is the record braking purchase of gold by the central banks. According to the World Gold Council, the global gold demand increased in 2019 as the central bank bought 224.4 tones of gold in the second quarter of 2019 and taking their gold purchase to 374 tones which is most for any first half since 2000.
Last Year the Central Bank has added 651 tonnes in which 42 tonnes were added by RBI. In 2019, RBI has added more to there reserves and now the countries gold reserver stands at the high of 618 tonnes.
5.Local Government Policy
Due to the change in policies of the local government all over the world people have started investing in gold as a security or as an Investment and taking it as a precaution against the Volatile Market.
Will it rise more in the upcoming time??
The gold prices are rising in 2019 and the domestic price will end by 36000 and Rupees 40000 by 2020 end, says Kishore Narne, Associate Director, Motilal Oswal Financial Services. Harish V, Head of Commodities Research, Geojit Financial Services, concurs.