India contributes around 25% to the worldwide demand for gold, making the country one of the largest consumers of the precious yellow metal. Gold isn’t just used as an investment tool or for adornment but is also of high utility in the manufacturing of electrical and healthcare industries. This is why the gold price today or any other day is of the primary concern to consumers, investors, and manufacturers.
Apart from the general usage of gold, its value as an investment product is derived from its potential for high return, liquidity, low risk, tax savings, and other benefits. Note that Public Provident Fund (PPF) offers similar benefits as an investment tool. But the percentage of growth of returns can be better estimated in the case of PPF with the help of a PPPF interest calculator. Since gold price today or any other day change with fluctuations in the market, PPF is known to be better protected against most market risks.
Another thing when considering an investment in a low-risk product such as gold and PPF is the flexibility in returns. By flexibility, we mean that even though the PPF interest calculator will show you the amount you can expect to earn at the end of its 15-year maturity period, you will not be able to enjoy this monetary benefit prematurely.
However, in the case of the precious yellow metal, the option to sell it or buy it any day makes its returns flexible and immediate. You can simply check the gold price today and sell them off or purchase them at your discretion.
Even though the math behind buying and selling gold looks easy, several things are responsible for the changes in gold price today and on any usual day.
Here we list some crucial factors that affect the selling and buying of the yellow metal
What has caused the gold price today to rise or fall? How the market volatility affects it? These are questions that new investors often struggle with. The following pointers will help ascertain a definitive answer to these common queries:
Demand and Supply:
Gold holds a lot of significance for people in India. It serves as a protection against financial instability and has high cultural implications. It’s not just an investment product but also used for adornment. The more one wears it, the better social status one gets. Therefore there is always a heavy demand for gold in India.
Understanding the relationship between demand and supply with a gold prices today is simple. So, when the demand is more, the price increases because the supply is limited.
Rate of Interest:
The interest rate is inversely proportional to the gold price. This is because when the interest rates are high, people sell their gold to invest in deposits. Similarly, when the interest rates are low, there is an increased demand for gold, hence a price increase. Fixed return investment products like PPF will be preferred when the interest rate is high. You can use a PPF interest calculator to compute your fixed return on it.
The gold price today or any other day will vary when faced with inflation. At the time of inflation, the value of currency decreases. When the currency value decreases, people invest more in gold. This is because the precious metal has, over a reasonable period, proved to be an ideal hedge amid market volatility. This behaviour leads to higher gold prices during inflation.
The Indian government controls gold reserves. This means the Reserve Bank of India (RBI) can sell or purchase gold based on the changes in its economic policies. Trade wars may impact these policies. RBI may want to diversify its investment portfolio and buy gold, moving gold prices during such times.
Gold in India is majorly imported, which means that the gold with a value in dollars is purchased in the Indian rupee. So, when the value of the rupee falls against the dollar, gold prices increase in India. While the global market will not be affected by the rupee fall, the gold price will appreciate in rupee terms, negatively impacting the gold demand.
Gold usually outperforms other assets during an international crisis. This is why, the value of gold globally increases during such situations. Investors see it as a low-risk asset for parking funds, so their investment in it grows.
The Bottom Line
While investing in gold is highly encouraging for its low-risk and high-return potential, new investors must be aware of the factors mentioned above that affect gold prices from time to time.
Those looking to buy physical gold may also consider purchasing Sovereign Gold Bonds (SGBs) from RBI. Here all transactions, i.e., buying and selling of bonds, happen in cash, without the actual involvement of physical gold.