Not only in Indian market, the precious metal gold holds an allure since ancient times across the globe.
The gold and silver has made people worried due to continuous rise in the prices. The price of gold has reached an all-time high recently. But, why is this happening?
In this article, we will discuss about the probable reasons behind rise in gold price and associated impact on economy.
Historically, Gold has served as ome of the most reliable safeguard against inflation. Whenever inflation rates increase, conventional investments may struggle to maintain value. This prompts investors to use gold, which is often considered as ‘safe haven’. The intrinsic worth of gold always remains unaltered by currency devaluation. Now, inflation is happening globally, this is a fact!
This is also one key reason behind the rise in gold price rapidly.
Due to actions taken by Government, the buying and selling gold reserves influence its price in the market. When there is any large-scale purchases or sales are performed by governments, it leads to ripples in the gold market. In India, Reserve Bank of India or RBI’s gold reserves and transactions also influence price shifts.
When peace prevails, gold price remains low. However, conflicts between countries often lead to rise in gold price. It's not a new thing that ongoing geopolitical scenario is destabilizing the economic growth.
Any business depends on the dynamics between demand and supply. For gold price also, this dynamics is playing a crucial role.
The supply chain is solely dependent on mining and production. We all know that natural resources are limited, so, when the demand increases (whatever be the reason), the price increases. So who are buying gold now? The easiest answer is central banks.
Since ancient times, societies have utilised it as a medium of exchange. This also represents wealth.
Gold is a timeless investment valued for its stability, cultural significance all across the globe. The unique properties of gold make it an important industrial applications, including electronics and aerospace. The appeal, scarcity, as well as diverse utility continues to support its value.
Impact on Kancheepuram Silk Saree Industry: One burning example of hike in gold price is unprecedented price inceease of famous Kancheepuram silk. In India, April and May mark the beginning of new year in many states accompanied by numerous festivals and marriage. Over the last 8 months, the price has increased by nearly 50%, which led to a decrease in sales.
V K Dhamodaran, Kancheepuram Silk Saree Manufacturers Association, said: “The cost of Kancheepuram silk sari is determined primarily by gold and silver rates as the two metals are essential to make the 'zari' that is part of traditional silk sari.”
Rise in gold and silver price impacted manufacturing and life of weavers.
Impact on Gold Loan Industry: Even, the rise in import costs are hurting India’s trade balance as well as current account deficit. This impacts gold loan industry as borrowers find it more challenging to repay their loans due to sharp rise in collateral.
Although being the second largest importer of gold, the demand of gold in India has seen a drop in last few months due to unexpected rise in prices.
Generally, Gold price shifts largely on Mondays, Wednesdays, and Fridays. As per industry experts, gold price is expected to rise more in coming days.
