New Delhi [India], March 20: “All that glitters is not gold.” Often used as an idiom to describe not everything that looks valuable turns out like that. But when it comes to gold, its enduring brilliance has consistently proven its value and multifaceted utility.
Across all cultures, attitudes towards gold are almost universal – it continues to be recommended as a tool for investment. In India, every household has some proportion of gold invested either in jewelry or in other assets. Its intrinsic value and timeless storage continue to attract the layperson, along with investors and financial analysts.
Gold isn’t just bought for jewelry and investment purposes, it is also used for electronics and for manufacturing devices. It is because of this, and of general increased interest in the precious metal, that has led to the almost exponential increase in its price over the past 50 years.
This year, gold prices hit an all time high, making it an expensive affair to buy. Its rise is mainly influenced due to several economic factors.
One of the major reasons for the gold price hike is the fluctuation of currencies, especially the US dollar. When the dollar is weak, gold becomes cheaper for non-dollar buyers, which increases the buying power of investors and consumers, thereby pushing the prices up due to increased demand.
Investors and consumers also buy gold as a safe asset to protect their wealth against inflation, COVID-19 being an apt example. At the time of the pandemic, gold had a positive return, but the market was facing economic downturns and price fluctuations.
That notwithstanding, government policies also impact the gold rate in many ways. Changes in import and export duties, taxes, interest rates, and other restrictions are often responsible for the uptick in gold prices.
Gold retains its value not only during financial crises but also during geopolitical instability. That’s why people call it a “crisis commodity.” The reason for this name becomes clear when it takes on the role of a portfolio savior when world tensions rise.
On a domestic front, gold has witnessed stupendous growth during wedding seasons in India. India is the second-largest gold-consuming nation in the world after China. In 2024, its gold consumption rose to 900 metric tons, whereas India stood at 761 metric tons.
Additionally, global supply and demand have a huge impact on the gold price hike. The amount of gold produced by mines is decreasing; which is influencing a price hike in gold as the supply decreases. With gold being a key reserve instrument, government vaults and the central banks also drive prices up when they buy more gold to protect their currency.
With so many factors bringing up the price of gold, the gold price hike in India as well as in global markets is a good representative of investor sentiment during these turbulent times. One should monitor these factors before considering making gold investments.
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Divya Agarwal
