Historically, and yet again, Gold remains the safest bet for investors as the yellow metal has repeatedly outdone equities and mutual funds. On August 26th, for the first time in history, gold reached the Rs. 40,000 mark. Due to international and domestic factors, gold has risen over 29% in the last 12 months.
Gold is a safe haven for investors, and its price often shoots up at times of uncertainty. The factors behind the recent spike in prices are:–
- Heavy buying by central banks all around the world
- Russia, China, and India have increased their gold reserves by 20%, 4.6%, and 10.8% respectively.
- Demand for gold – a safe haven – goes up in times of global economic crises.
- In the last 12 month, gold (29%) has delivered better return than Sensex (-3.7%)
- Increased import duty to 12.5% from 10%
- Weak global economic outlook
- Downbeat Asian markets
- The falling value of Rupee makes import expensive.
- The net outflow of foreign investment in India
- Trade war between the US and China
Who sets Gold Prices in India?
Indian Bullion Jewellers Association (IBJA) plays a key role in gold price determination in India. IBJA members include the biggest gold dealers in the country who provide their buy & sell price. IBJA then takes an average of these rates and determines the gold rate after adjusting taxes.