{"id":8789,"date":"2023-08-28T12:13:01","date_gmt":"2023-08-28T12:13:01","guid":{"rendered":"\/blog\/?p=8789"},"modified":"2024-09-05T14:31:21","modified_gmt":"2024-09-05T09:01:21","slug":"why-have-gold-prices-surged-in-the-past-year","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/wealth-services\/why-have-gold-prices-surged-in-the-past-year\/","title":{"rendered":"Why Have Gold Prices Surged in the Past Year?"},"content":{"rendered":"\n<p>Last year, the price of gold on MCX surged\nby 25%. Gold finally came out of a six-year trading range and delivered strong\ngains. This bullish rise in gold prices is expected to continue in 2020, with\nsome experts even quoting specifics like a 12%\u200a\u2014\u200a13% increase. Before we\naddress the real causes behind this surge, here are a few factors that affect\nthe price of gold.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Consumer Demand:<\/strong> India has been diagnosed with \u2018gold fever\u2019 for being heavily biased towards gold as a secure investment for the long term. Consumer demand for gold in India is high. <\/li>\n\n\n\n<li><strong>Inflation: <\/strong>Gold acts as a hedge against inflation. So whenever costs increase in any way whatsoever, people turn to gold jewellery, gold bonds or gold ETF as a form of \u2018pure\u2019 investments that will not be subjected to inflation. <\/li>\n\n\n\n<li><strong>Economic Uncertainty<\/strong>: Physical gold, gold ETFs and gold bonds can diversify one\u2019s portfolio. While market uncertainty can affect equity investments, investors flock towards gold as their safe haven.<\/li>\n\n\n\n<li><strong>Interest Rates:<\/strong> Higher interest rates can also push investors towards keeping a section of their portfolio in gold bonds. The rising yield from higher interest ultimately leads to the expectation of a stronger economy. A strong economy results in inflation and gold can be used as a hedge during this time.<\/li>\n\n\n\n<li><strong>Rupee-Dollar Exchange Rate:<\/strong> If rupee weakens against the US dollar, gold prices will also depreciate in rupee terms. A depreciating rupee has the potential to reduce the demand for gold in India. However, this change will not be for the gold outside India, denominated in dollars.<\/li>\n<\/ul>\n\n\n\n<p>There are other factors like geopolitical\ntension, weakening of the dollar, and monsoon season, all of which contribute\nto the price of gold in India. However, the core factors that contributed to\nthe surge in gold prices in the last year have been the fall in equities due to\nthe COVID-19 pandemic in addition to rupee depreciating in value, and India\u2019s\nincreased import levied on gold. <\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"770\" height=\"400\" src=\"\/wp-content\/uploads\/2020\/04\/why-have-gold-prices-surged-in-the-past-year.jpg\" alt=\"Gold Price surged\" class=\"wp-image-8791\" srcset=\"https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/why-have-gold-prices-surged-in-the-past-year.jpg 770w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/why-have-gold-prices-surged-in-the-past-year-300x156.jpg 300w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/why-have-gold-prices-surged-in-the-past-year-768x399.jpg 768w\" sizes=\"auto, (max-width: 770px) 100vw, 770px\" \/><\/figure>\n\n\n\n<p>Firstly, it seems like no investment\nportfolio is immune to the coronavirus. Global oil prices have fallen, and so\nhave equities. Stock market crashes in March were seen in India and\ninternationally. However, gold seems to be on a rising spree for the last few\nmonths. Investors with exposure to gold are sitting on a profit of more than\n12% so far in 2020. Experts expect gold to go as high as \u20b954,000 to \u20b955,000, a\n25% surge from the current levels. The reason for gold outshining the rest\nduring this time is that it is negatively correlated to equities. In fact, in\nthe 2008 financial crash gold prices surged, as they are now that there is a\npandemic ravaging.<\/p>\n\n\n\n<p>Whenever the rupee depreciates, gold follows\nsuit. The rupee has also had to cope with an unexpected coronavirus outbreak.\nWith COVID-19 threatening to derail economic growth, an already weak Indian\neconomy is giving forex dealers some jitters about its value. As it disrupts\nsupply and trade chains between countries, the nearly 3% fall of the rupee from\nJan 1st to March 3rd seems warranted.<\/p>\n\n\n\n<p>To import gold into India, there is a 12.5%\nduty with added goods and service tax of 3%. There is also a negative feedback\nloop that has been created by gold prices increasing. With every 1% increase in\nthe price of gold, experts claim that the demand for it drops by 0.9%. This\nfurther increases the prices people are shifting away from gold. In fact, in\n2019 the Indian demand for gold witnessed a sharp drop when gold hit its record\nhigh on MCX. <\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"604\" height=\"389\" src=\"\/wp-content\/uploads\/2020\/04\/why-have-gold-prices-surged-in-the-past-year-2.png\" alt=\"\" class=\"wp-image-8792\" srcset=\"https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/why-have-gold-prices-surged-in-the-past-year-2.png 604w, https:\/\/tata-blog.osian.dev\/blog\/wp-content\/uploads\/2020\/04\/why-have-gold-prices-surged-in-the-past-year-2-300x193.png 300w\" sizes=\"auto, (max-width: 604px) 100vw, 604px\" \/><\/figure><\/div>\n\n\n<p style=\"font-size: 12px;\">Source: Livemint<\/p>\n\n\n\n<p>According to the World Gold Council, the\ndemand for physical gold in the form of jewelry dropped by 40% between Q2 and\nQ3 in 2019 alone. Moreover, one can annually expect an average drop in the\ndemand for gold by 32%. People tend to prefer paper gold due to its lower\nmaintenance costs and fewer risks in terms of security and value depreciation.\nHowever, the surge in prices is preventing many from buying it.<\/p>\n\n\n\n<p>In conclusion, gold prices have increased\nfrom a combination of the COVID-19\u2019s economic impact, India increasing gold\nimport duty, and the depreciation of the Indian rupee against USD. As\ncoronavirus grips the global stock markets, and India\u2019s GDP lags, investors\nseem to be choosing to return to paper gold for its protective purposes. As\ntheir demand for paper gold grows in the form of gold bonds and gold ETFs, some speculate that gold prices may see\na decline in 2020.<\/p>\n\n\n\n<p>Consider Tata Capital for all your investment needs. From <a title=\"Wealth Management Services\" href=\"https:\/\/tata-blog.osian.dev\/wealth-management.html\">wealth management services<\/a> to help you perfectly allocate your portfolio based on your needs, to commercial loans to jumpstart your next business idea, Tata Capital is among the top service providers in India. Visit the website here to learn more.<\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"https:\/\/tata-blog.osian.dev\/wealth-management.html\">Know More<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Last year, the price of gold on MCX surged by 25%. Gold finally came out of a six-year trading range and delivered strong gains.  <\/p>\n<p><a href=\"https:\/\/tata-blog.osian.dev\/blog\/wealth-management\/\">Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":8790,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[37],"tags":[],"class_list":["post-8789","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-wealth-services"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.13 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why Have Gold Prices Surged in the Past Year? - Tata Capital Blog<\/title>\n<meta name=\"description\" content=\"Due to Consumer Demand, Inflation and Economic Uncertainity affect the gold prices rise. 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