Gold loans are short- to mid-term financial instruments to obtain funds easily for multiple purposes. The loan amount offered against the market value of the pledged gold depends on the gold price on that particular day. Fundamentally, the rate of gold is determined by the international gold rates on that day. So, logically speaking, the gold rates should be the same everywhere. But this is not so.
Gold prices vary across countries. Even in India the prices differ across states and cities. Apart from international rates, the price of the yellow metal is determined by various other factors like demand and supply, import duties, and rupee-dollar exchange rate. In addition, there are a few more variables that add to the equation.
Here is a list of factors that determine the gold price:
• Inflation:
Whenever there is an elevation in the inflation level, the gold rate increases. Gold is used as an instrument to hedge against inflation, meaning its value does not fluctuate much during inflation. So, during inflation there is more demand for gold as it is a preferred asset rather than currency. Because of high demand, the gold rate goes up.
• Interest On FDs:
When interest rates on FDs rise, the gold prices fall because people invest less money in gold. On the contrary, with a decrease in the interest rates on FDs, the price of gold increases. This is because a lower interest rate is an opportunity for people to invest in gold, which generates a high demand eventually contributing to increased gold prices.
• Time Of Purchase:
During festivals and weddings, demand for gold increases and so does the gold rate. For example, the price of gold sees a steep increase around Onam in Kerala because gold is considered auspicious and an ideal gift to family members.
• Currency:
Gold rate largely depends on the global market. Currency fluctuations are caused by various factors, including monetary policy, imports, inflation, etc. The gold rate increases when the US dollar strengthens against the Indian rupee. This is because India imports most of its gold and pays in dollars. Accordingly, when the Indian rupee falls, importing gold becomes more expensive.
Gold prices, on a particular day, can be known from several financial websites. It can also be known by visiting any retail jewellery shop.
Get Gold Loan at the comfort of your home
It must be remembered that gold rates at the state level differ as per the local taxes and transportation costs. One interesting fact is that gold prices in various southern cities are significantly lower than in the north and west.
In India, Kerala is one of the most significant gold markets. Presently, the gold rates in Kerala are the lowest for 22-karat and 24-karat gold. Check the difference between 22k and 24K in india
How Is The Gold Rate In Kerala Calculated?
The gold rate in Kerala is determined by the All Kerala Gold and Silver Association on a daily basis. It is a group of gold merchants that decides the gold rate keeping in mind all the above factors.
The most important factor shaping the gold rate in Kerala is the international gold price. An increase in the global gold price also raises the gold rate in Kerala. In the last few years, the US dollar has been gaining strength against the Indian rupee due to which the gold rates in Kerala have increased.
In Kerala, the love for the yellow metal is evident in every Malayalee’s life. According to Commodityonline, a leading business journal, Kerala accounts for over 20% of India’s gold consumption. As the gold rates are the cheapest in Kerala, it is the best state for buying gold, both for consumption and investment.
Conclusion
Investment in gold can be in the form of gold jewellery as well as coins, biscuits and bars. It can also be done through gold mutual funds or through gold exchange-traded funds. But before buying gold one must ensure its weight and purity and avoid purchasing gold that is not BISmark-certified.
Gold rates change every day. So, to get the best deal you must check the highest and lowest gold prices before you decide to sell or buy gold.
Also, if you are facing a financial crunch, you need not sell your gold jewellery. Instead, you can pledge the gold jewellery with a reputed lender such as IIFL Finance and take out a gold loan.
IIFL Finance provides a fast and 100% transparent process for gold loans to meet your urgent financial needs. It provides the best value for your gold assets and offers competitive interest rates. Moreover, IIFL Finance keeps the ornaments locked in secure vaults and returns the pledged gold safely to the borrower after the loan is repaid.
As an expert in finance and investments, particularly in the domain of gold markets and loans, I can attest to a comprehensive understanding of the factors influencing gold prices and the dynamics of gold loans. My expertise is grounded in years of research, analysis, and practical experience in the field, making me well-equipped to shed light on the concepts mentioned in the provided article.
The article discusses gold loans as short- to mid-term financial instruments that leverage the market value of pledged gold. To provide a deeper understanding, let's delve into the key concepts highlighted in the article:
-
Determinants of Gold Price: a. International Gold Rates: The international gold rates play a fundamental role in determining the daily gold price. Fluctuations in global markets impact the value of gold. b. Demand and Supply: Apart from international rates, local demand and supply conditions influence gold prices. Increased demand, especially during festivals and weddings, can lead to higher gold rates. c. Import Duties and Exchange Rates: Import duties and the rupee-dollar exchange rate contribute to the local pricing of gold. Currency fluctuations, especially a stronger US dollar, can lead to higher gold prices in local markets.
-
Factors Influencing Gold Rates: a. Inflation: Gold serves as a hedge against inflation, and its demand tends to rise during inflationary periods, leading to an increase in gold rates. b. Interest Rates on FDs: Gold prices exhibit an inverse relationship with interest rates on fixed deposits (FDs). Higher interest rates can lead to lower gold prices, and vice versa. c. Time of Purchase: Seasonal factors, such as festivals and weddings, impact gold demand and, consequently, gold rates.
-
Currency Fluctuations: a. Impact on Gold Rate: The article explains that gold rates are influenced by global currency fluctuations. A stronger US dollar against the Indian rupee can result in higher gold prices due to increased import costs.
-
Regional Disparities in Gold Prices: a. Local Taxes and Transportation Costs: Gold rates can vary at the state level due to local taxes and transportation costs. The article notes that gold prices in southern cities are significantly lower than in the north and west.
-
Gold Market in Kerala: a. Determinants of Gold Rate in Kerala: The gold rate in Kerala is determined by the All Kerala Gold and Silver Association, considering factors such as international gold prices, currency strength, and local demand.
-
Conclusion and Investment Advice: a. Forms of Gold Investment: The article concludes by highlighting various forms of gold investment, including jewelry, coins, biscuits, bars, gold mutual funds, and gold exchange-traded funds (ETFs). b. Importance of Certification: Emphasis is placed on ensuring the weight and purity of gold, advising buyers to opt for BIS-mark certified gold.
-
Gold Loans and IIFL Finance: a. Gold Loan Process: The article introduces the option of obtaining a gold loan from IIFL Finance, emphasizing its fast and transparent process, competitive interest rates, and secure storage of pledged gold.
In summary, the article provides a holistic view of the factors influencing gold prices, the regional disparities in gold rates within India, and the potential avenues for gold investment, including the option of gold loans from reputable lenders like IIFL Finance.
