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Why is gold expensive

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Why is gold expensive

Why is gold expensive : At one time India was called the ‘golden bird’ but the truth is that even today India is the gold bird because it is the second largest gold consuming country in the world.

There is so much gold kept in the homes and religious institutions of India that any country would be jealous of it.

According to the World Gold Council, 24,000 to 25,000 tonnes of gold is kept in Indian homes. This does not include gold held in religious institutions in India. Sri Padmanabhaswamy Temple in Thiruvananthapuram has gold worth $22 billion. If we talk about all the temples of India, 4 thousand tonnes of gold is kept there. India’s central bank RBI purchased 40.45 tonnes of gold in the financial year 2019-20, due to which it now has total gold reserves of 653 tonnes.

Due to the Corona epidemic in India, the demand for gold has declined by 36 percent to only 111.9 tonnes in the January to March period of the financial year 2020, which was 159 tonnes in the same period of 2019.

In March 2020, the price of gold was Rs 42,200 per ten grams, which increased to Rs 52,000 per ten grams in July 2020.

In July 2020, the price of 24 carat gold in Chennai reached Rs 53,490 per 10 grams. Apart from this, the price of gold is above Rs 50,000 per 10 grams in almost all major cities of the country.

Now the question arises that why is the price of gold increasing in India?

1. Safe means of investment: After the fall in Sensex, the price of gold starts increasing, this is because people do not trust the uncertainty of the stock market and look for safe means of investment.

Investing in gold is considered the safest because its value does not change much and gives fixed returns.

2. Low interest rates: The interest rates of most of the deposit schemes in the country like savings certificates, bank savings accounts, fixed deposits, employees provident fund etc. have been reduced significantly. Therefore, investors are buying gold by withdrawing money from such investment instruments, due to which the demand and price of gold is also increasing.

3. Traditional Demand: There is hardly any wedding in India in which there is no demand for gold. There is a lot of uncertainty in the minds of people regarding the market, hence people have started considering gold as a good option instead of giving it in marriage. Gifts of real estate and automobiles.

Real estate and cars require a lot of money and people have to pay EMIs for a long time which would not be a good decision due to ‘uncertainty of work’.

4. Inflation does not matter: In times of rising inflation, gold is always considered a safe asset. This means that it is not affected by inflation. Due to Covid-19, the prices of many things have increased, due to which people fear that inflation will increase in future, so invest in gold.

5. Gold does not give rise to any liability, is highly liquid, is a reserve asset and is considered a status symbol. For these reasons its demand always keeps increasing.

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