Gold and its price fluctuations

Podcast Duration: 05:48
Factors affecting gold prices

नमस्कार मित्रो। एंजेल वन के इस podcast में आपका स्वागत है ।

People tend to forget that until the 1970s, the world was actually on a gold standard. Even today, gold plays an important role in the world economy. Corona virus ke panic ki wajah se gold is back in fashion. Gold is a useful store of value because unlike block-chain based crypto currencies, gold has inherent value. Gold is also naturally a limited resource, unlike bitcoin, whose numbers are artificially capped at 21 million.

Purane zamane se 2020 tak logo ne gold ko precious metal maana hai. Aage bhi maanenge. This is not only because of gold's aesthetically pleasing nature. Gold has a lot of applications in the engineering professions. Gold is used to build certain mobile components and other tools that cannot be built without it. Gold ke unique physical aur chemical properties ki wajah se iss metal ke itna widespread applications hai.

In this podcast, let's look at 7 factors that affect the price of gold.

First, let's look at inflation. One of the major reasons people buy gold is to offset the depreciation of their currency due to inflation. As everything becomes more expensive over time, the purchasing power of, say, a ₹100 note will decline over time. Gold, on the other hand, gains value over time. Therefore, it has always been a good option for those looking to stay on top of the inflation. Inflation badta hai toh log gold mein zyada invest karte hai. Because of this move, the demand for gold increases, thereby driving up its price.

Gold does not outpace inflation every single time if you break up the flow of time into individual decades. But if you take up larger chunks of time, then gold does look like a good shield against inflation.

Secondly, let's look at interest rates. The interest rates, determined by market forces and central banks, affects how much casual income people can make. That is, interest rates determine how much money people can make simply by putting away their money in the bank.

If interest rates go up, people liquidate their gold assets and reinvest their money in fixed deposits and other such financial assets to profit from the high interest rates. Gold ke sudden selloff ki wajah se market mein gold ka supply gold ke demand ko overtake kar leta hai. Because of this, the price of gold falls.

Conversely, if the interest rates are cut by the central bank, then people again look towards gold to provide them a cushion against inflationary pressures. The value of gold goes up as people clamor to buy it.

Therefore, interest rates and the price of gold have a generally inverse relationship.

Let's look at the third factor: The Indian jewelry market. The Indian jewelry market is the second biggest in the whole world after China. Indians buy north of 400 metric tonnes of gold per year. Agar central banks ko na gine toh Indian households hold more gold reserves than any other group in the world. That is, at 24,000 tonnes, more gold is held in India by private citizens than any other country. Isleye india mein gold ki demand ka asar global gold prices pe dikta hai.

Wedding seasons mein gold ka demand highest rehta hai. Therefore, if the economy slows down, and people choose to not splurge so much during weddings, then the demand for gold might be lower than average. Changing demand in the Indian market will drive down the price of gold.

Ye next fact kaafi logo ko chauka sakta hai. More than 60% of the demand for gold in India comes from rural India. Ye baat surprising bhi hai, aur obvious bhi. Surprising isleye ki bhale hi hamare desh mein 60% log villages mein rehte hai, par rural population ka purchasing power urban population se kam hota hai. Par phir urban Indians ko invest karne ke liye sophisticated financial tools mil jaate hai - jaise ki mutual funds or equity linked savings schemes. The penetration of these financial instruments is very low in rural India. Therefore, rural Indians have gold as one of their big investment options.

Ab aap hi sochiye: aisa konsa factor hai jo rural Indians ki aam dani, yaane ki unke livelihood, ko sabse zyada effect karta hai? The answer is rainfall. Therefore, if the monsoons are good, then the demand for gold goes up in India, as rural India has more disposable income to expend. Higher demand therefore drives up the price of gold.

Agar aasaman mein aapko bhaari barsaat banti hui dikhe, toh samaj lijiye ga ki gold ka price badne waala hai!

The next factor that affects gold prices is the behaviour of central banks and governments. Agar central banks gold buy karte hai, toh economy mein gold ka supply kam hota hai, aur cash ka supply badta hai. This drives up the price of gold. Similarly, if the central banks liquidate their gold holdings, then the sudden gold influx into the market will see the prices of gold drop.

Finally, kisi bhi kisam ki instability mein log gold khareedna pasand karte hai. This is because people consider gold to be an effective buffer against chaos of any sort - including the instability resulting from economic, political and social factors.

चलिए, एंजेल वन की तरफ से आपको आज के अलविदा. ये podcast शेयर करना ना भूलियेगा - याद रखियेगा की ज्ञान बाटने से बढ़ता है । और फिर अंत में तोह financial markets एक ऐसी university है जिसमे कोई professor नहीं, सब students ही है ।