6 Key Factors Which Cause Change In Gold Prices

Factors Causing Change in Gold Prices

Change in gold prices incorporates a multitude of factors that drive the fluctuations in its value in the market, making it always a topic of discussion. 

Gold with its timeless charm, cultural significance, and a storied history, occupies a unique and a well established place in the global market landscape. 

Factors Causing Change in Gold Prices

Gold, which is beautifully used as a jewel from many decades till date, is now also being used in different forms, like digital gold, gold coins, as the investment commodity, and more, which all lays a strong impact on the change in its prices. 

Gold prices in India as of March 2024 experienced a slight increase, however these prices keep on fluctuating or witness an increase on a daily basis according to the market dynamics. 

There are several factors which are responsible for the change in gold prices, however, in this article we’ll discuss some of its key factors. 

Factors that Causes Change In Gold Prices 

Sr.No.  Factors Reason 
1. Market trends The market trends plays a crucial role in determining the gold rates in India as well as in the global market. 
2. Government rules and regulations Policies set by the government have a significant impact on gold prices. 
3. Consumption demand More and less demand of gold draws an effective impact on change in gold prices. 
4. Interest rates Gold prices and interest rates are correlated. 
5. Cover against volatility Gold is also used as a protection cover against uncertainty and volatility, which affects the change in its prices. 
6. Exchange rates value Fluctuation between Indian rupee and other currencies lays a strong impact on its change in prices. 
Factors causing change in gold prices

1. Market Trends 

The market trends are said to play a crucial role in causing the change in the prices, be it in India or any other country. Gold is being exported and imported worldwide, and its demand in the international space lays a strong impact on its prices in the local markets.

The global market trend factor depends on factors like currency fluctuations, economic conditions, geopolitical events, geography, and more like that. 

Investing in gold can also be turned out to be a safe and secure investment, especially when the international market is experiencing fluctuations or increase in its prices. 

2. Government Rules and Regulations 

Policies and set of rules determined by the Government lays a significant impact on the gold prices. Like the changes in the taxes, import duties specially on gold imports, changes in the export duty, etc. 

Gold is often seen as an alternative or hedge against the increased prices (inflation), government policies and regulations that are responsible for influencing the gold rates.

Rules for gold prices

When the inflation rates rise, the investments may struggle to maintain value in the market, making investors turn to gold as a safe investment or safe place.

The interesting fact about this is that the Its original value remains unaffected by currency fluctuations, making it a reliable option to pick, during the phase of economic uncertainty.

3. Consumption demand

Gold has a rich history, culture, and has been a crucial part of many rituals and events. The demand of gold and its supply go hand in hand. There is always the demand for gold in the market, as it is not only just a metal, it has become a cultural symbol, wealth symbol, and also a good option to invest in. 

The demand of gold touches its peak especially during the special occasions, festivals, wedding season, all leads to the change in gold prices, leading to an increase in its prices in the market. 

Not only this, but the changes in the supply chain can have an adverse effect on the prices in the local market. 

4. Interest rates 

Gold prices and interest rates are correlated and share an inverted partnership. As the changes in the interest rates lays an inverse effect on the gold prices in the market. 

Interest rate and gold prices

As the lower interest rates are subjected to make look gold a more reliable and appealing option to consider. All this happens due to the inverse partnership they share. It also becomes an option for the ones looking for the low-yield investments. 

While on the other hand, higher interest rates lead to reduction in gold prices, making other investment options look more appealing and profitable, as they’ll provide higher returns on their investments. 

5. Cover against volatility 

Gold is often seen as a protection cover which can be used against the uncertainty and volatility caused, which draws an impact on the change of its prices. 

Many of the population invests heavily in gold, which turns out to be their protection suit in the phase of uncertainty and changing market dynamics.

The choice and preference of this physical asset, i.e. gold, makes almost every house space in India to view it as a safe and secure option to consider, when the other investment options or assets are turning down or losing their value. 

Gold is also often purchased as the asset which will be a better option to look at both in bad as well as good times. 

6. Exchange rates value 

It’s a pretty known fact that gold is being priced and sold in US dollars, and the fluctuations between the currencies, i.e. Indian currency and Us dollar currency, which  eventually impacts the gold prices in the Indian market. 

Gold prices and US dollar

Less or a weaker value of Indian rupee against the dollar leads to an increase in the gold prices in the Indian market. Similarly, a stronger or a higher value of Indian rupee in comparison to the value of US dollars leads to the decreasing prices of gold in the market. 

Apart from the above listed, there are some other factors which can have an adverse effect in the change of gold prices. Like – 

  • Investors speculation: Investors speculation and belief in the market can also impact the gold rates. The prices of gold can be influenced by other factors too, like the market sentiment, trading volumes, and other trends in the financial markets.
  • Industrial demands: Gold also has some industrial applications use, which led to its more demand in the market. 

Consider the fact 

Gold prices made a historic rise to hit a life-time high of $2,126 per ounce in March 2024, marking it the highest closing since its inception of contracts in 1974. 

This milestone came after recording the highest closing peak in December 2023, when the prices touched $2,149 per ounce.

Summing Up

Change in gold prices has both, the positive as well as the negative impact on the market. It incorporates factors like market trends, rules and regulations set by the government, interest rates, demand and supply, etc. 

Factors causing change in gold prices

Irrespective of the time, Gold has always played a major role in the market. Gold stood as a symbol of heritage, culture, and also as a mark of financial security. Gold offers a great value be it in terms of investments or as a piece of jewelry. 

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Published By: Aashita Singh
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