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| March 4, 2024

Top Reasons Why Gold Prices are increasing in India

Gold holds immense cultural, religious, and economic significance in India, making it a precious metal that is deeply entrenched in Indian society. This precious metal transcends generations, with families passing down their gold holdings as a form of wealth preservation.

Beyond its ornamental and ceremonial value, gold has also been established as a secure and enduring investment avenue for many of us. Investing in gold has been a time-honoured tradition in India, often considered a safeguard against economic uncertainties. The yellow metal has historically remained more or less stable, maintaining its value even during turbulent times, making it a reliable choice for people who want safe investments. A lot of individuals turn to gold not just for its aesthetic appeal but also for its ability to act as a hedge against inflation and currency fluctuations.

Moreover, gold can also be leveraged to access quick funds through a gold loan. This type of loan allows individuals to unlock the value of their gold holdings without having to part with them permanently. With a straightforward and easy loan application process, a gold loan is the best way to meet your immediate financial needs.

Gold’s market price affects the gold loan amount that you will be able to avail since the loan amount sanctioned is a percentage of its current market value. As gold prices rise, you may find that the value of your collateral increases, allowing you to borrow more. Thus, it is imperative to understand the relationship between the price of gold and gold loans and stay updated with the market trends.

Top Reasons why Gold Prices are increasing in India

The recent years have seen a steady rise in the price of gold in India, capturing the attention of investors and gold owners alike. This surge, influenced by a confluence of factors, has encouraged more and more people to buy gold at the market’s current price and avail gold loans during favourable conditions. Here are some of the reasons why gold loan price is on the rise:

Inflation as a Catalyst

One of the primary drivers behind the escalating gold prices in India is inflation. Gold has long been considered a hedge against inflation, acting as a safe haven for investors seeking to preserve their wealth amid rising prices. As inflation decreases the purchasing power of a currency, individuals turn to gold as a reliable store of value. This heightened demand often pushes gold prices upward, making it an attractive asset during economically uncertain times. Thus, the price of your 5 gram gold coins will increase significantly, allowing you to sell it at a higher price or avail an attractive gold loan amount.

Global Movement and Market Sentiments

The global movement of gold prices significantly impacts the Indian market. Gold is a globally traded commodity, and any shifts in the international market have a ripple effect on India's gold prices. The recent economic uncertainties, geopolitical tensions, and changes in currency values on the global stage have prompted investors to turn to gold, thereby driving up prices domestically. Thus, the global economy makes gold prices susceptible to fluctuations based on external factors beyond national borders.

Government Gold Reserves

India's gold reserves play a crucial role in influencing domestic gold prices. When the Reserve Bank of India accumulates or reduces its gold reserves, it sends a strong signal to the market. Increased government purchases of gold often lead to a surge in prices. Conversely, if RBI decides to sell its gold reserves, it can contribute to a temporary dip in prices. Usually, people tend to buy gold in the form of 5 gram or 2-gram gold coins at lower prices and when there is a surge in prices, the gold is used for obtaining quick funds via a gold loan.

Jewellery Market Dynamics

Weddings, festivals, and other celebratory occasions fuel the desire for gold jewellery, a tradition deeply embedded in Indian culture. The seasonal spikes in demand for gold jewellery often coincide with festivals and wedding seasons, putting pressure on the available supply and consequently driving up prices. The demand for a gold loan also increases around this time as people look to fund weddings and other important celebrations.

Interest Rate Trends

Interest rates play a pivotal role in shaping the demand and price of gold. In times of low interest rates, the opportunity cost of holding gold diminishes compared to interest-bearing assets. People are more inclined to allocate funds to non-interest-bearing assets like gold when interest rates are low. Conversely, rising interest rates can make other investments more attractive, leading to a decrease in gold demand and subsequently impacting its prices.

Avail a Gold Loan with Muthoot Finance

Availability of a gold loan is the best way possible to leverage your gold jewellery during rising prices. Known as India’s no. 1 trusted financial services company, Muthoot Finance offers hassle-free quick gold loans to a large customer segment. Having served over 70cr+ customers to meet their financial requirements, our gold loans are extremely accessible with the lowest interest rates and flexible repayment options. Visit your nearest Muthoot Finance branch to know more.

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