Gold price in India is hovering over Rs 36,000 per 10 gm of pure gold. The surge in the price has been continued since Friday when the gold crossed the $1,450 mark for the first time in the last six years. On Monday, spot gold was down 0.2 per cent at $1,422.74 per ounce as investors moderated expectations for a sharp interest rate cut at the end of this month. The sudden hike in the gold price was stimulated after the New York Fed President John Williams gave hints about the Fed rate cut. However, a subsequent clarification that the remarks were academic and did not indicate towards potential policy action pulled down the prospects. Meanwhile, the yellow metal has gained around 2 per cent since the last week and almost 11 per cent so far this year.
Why gold prices shot up?
- Pull out from the Indian equity market has made gold a profitable investment.
- Federal Reserve is likely to cut rates by 0.25 per cent by the month-end.
- The dollar index is not able to sustain the 98-mark.
- Central banks of major economies are continuously buying gold amid global concerns.
- IMF world economic forum has given a hint of overall economic slowdown
- Geopolitical tension and trade war has increased the demand for gold to be kept as a safe reserve.
After the gold prices shot up, the demand for gold in the Indian retail market has come down. The lack of demand is also due to the ongoing inauspicious days and the increase in import duties by 2.5 per cent. India is the second-largest consumer of gold and the metal holds a major role in the country’s culture. India uses most of its gold imports to make jewellery. A symbol of wealth and a safe investment are the two most accepted beliefs in India, keeping the gold in high demand. Consumption and demand for gold in India have the potential to affect the global market of gold.
“Jewellery demand was a touch stronger y-o-y at 530.3 tonne, chiefly due to improvement in India’s market”, according to the World Gold Council.