The country's favorite investment is influenced by a range of economic factors.
Gold is India's most popular investment option and the country is one of the largest consumers of the metal, contributing around 25 per cent of the global demand.
Gold is regarded as a safe investment, especially during economic and financial crises. Investors use gold as an instrument to shield their portfolio investment. Gold prices fluctuate in financial and political uncertainties as well as changes in interest and exchange rates, government policies, and other reasons.
The coronavirus pandemic upended the gold market in 2020. The temporary closure of refineries and mines affected supplies, while social distancing, curfews, and lockdowns measures hurt demand. Demand returned when other investment options looked shaky in the pandemic.
Here is what shapes gold investment.
Demand and supply
According to the World Gold Council, with a one per cent rise in income per capita, gold demand rises by one per cent. With a one per cent increase in prices, gold demand dips by 0.5 per cent.
Jewelry demand is rising in India for weddings and festivals, causing an increase in gold prices.
The amount of gold mined decreases every year, but not demand. Mines and refineries comprise the majority of the total gold supply, and jewelry makes up for over half of the total demand. The difference between total demand and total supply is a deficit or surplus (net balance, reflecting the gold price to go rise or dip).
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