How Have Gold Prices Moved In India In The Last 10 Years?

Gold boasts a cultural significance and is often a widely popular choice for investors to hedge against inflation. However, the price of gold fluctuates backed by several factors. Despite fluctuations, the gold price has surged by nearly 900% in the last 10 years.

If you take the average annual gold price during this period, 2011 recorded the highest increment. In 2021, it is going through a fluctuating trend, yet currently showing a positive rise in value. 

Several factors influence this fluctuating trend of gold prices. Let’s delve deeper into each of these:

• Interest Rate 

The gold price is inversely related with prevailing interest rates. As interest rates decrease, individuals don’t get favourable gains on their investments in fixed-income instruments. Hence, they use their deposits and invest in gold to receive lucrative returns. This increases the demand for gold and so its prices.  

Conversely, when interest rates move northward, people sell it for investing in deposits to get a high interest income, prompting a fall in demand and prices.

• Inflation

When the inflation rate increases, money’s value decreases. Moreover, most investment avenues fail to deliver inflation-beating returns. This increases the appeal of gold as a safe hedge, and most people start investing in gold, thanks to its risk-free nature.

• Demand And Supply

Gold acts as a long-term asset such as stocks and bonds. Thus, particularly like the stock market, the price of gold is forward-looking and dependent on future demand and supply. On the other hand, reduced gold mining activities over the years also decreased its supply, failing to meet the growing demand. It has led to an almost 9x increase in gold prices over the past 10 years.

• Currency Fluctuation

Gold is largely imported in India. In the international market, gold is traded in USD, converted into INR during imports. Thus, any fluctuations in USD and INR can affect import prices of gold and hence its selling price. 

• Government Reserves

The Indian government owns gold reserves. It can sell or purchase gold through the Reserve Bank of India, depending on its policy. Its price will vary based on how much it is sold or purchased.

• Indian Jewellery Market

Gold is an integral part of Indian religious and wedding events. Thus, during the marriage or other festive seasons, the sale of gold increases. This means a growing demand and a boost in its price.

• Fluctuation In International Market

India is heavily dependent on the import of gold from foreign markets. Thus, any change in import duties, exchange rates, and other factors impact gold prices in India.

These are the common causes that have impacted the gold price in the last 10 years.  Now that we have understood how gold prices are affected, let’s consider the factors contributing to the rise of gold prices in recent times. 

Why are Gold Prices On The Rise?

Investors are curious about the rise in prices of gold lately. Analysts say that this uptrend in gold value is due to multiple factors. 

To answer these questions, we present four reasons for the rising gold prices in recent weeks.

• Economic Slump

With the rise of global economic uncertainty, the interest rate slumped. Reduced interest rates prompted risk-averse investors to break their deposits to purchase gold, as it is considered a safe haven against financial turmoil. This rapidly increased the demand for gold, and so its price.

• Weak Dollar Value

Analysts suggest that a weak US dollar is one of the causes for rising gold prices. The value of the international dollar is based on gold. Hence, any depreciation in the dollar increases the gold value and vice versa, as already discussed above. 

Any fall in the value of the dollar escalates the value of other foreign currencies. This induces demand for goods and services and contributes to inflation. Further, with the decreased US dollar value, investors are looking for gold as another alternate safe investment option against rising inflation.

• Reduced Gold Mining

One of the essential factors that cause gold prices to rise is the relationship between demand and supply, as mentioned above. The economic slowdown has reduced gold mining activities across multiple countries. Therefore, though the demand for gold increases, its decreased supply is causing gold prices to rise.

• Rising International Prices

The US-Russia conflict coupled with rising inflation in the US and QE programme by its government has strengthened gold prices.

Is This The Right Time to Invest In Gold?

Many analysts suggest that it is an appropriate time for investors to hold gold for a medium to long term. But the current economic uncertainty makes it difficult to conclude. 

Nonetheless, willing investors can resort to online platforms. They make it easier for investors to invest in digital gold. Being completely online, investing in digital gold helps in hedging market volatilities and rising inflation. This will also diversify your investment portfolio.

So, should you invest in gold? It completely depends on the market. If the economy revives, it may reduce the gold price, and you may have to look for other investment avenues. In contrast, if the market continues to face economic slowdown and reduced interest rates persist, investing in gold is ideal. 

Bottom Line

According to data, the gold price in the last 10 years has historically been rising with few exceptions.  Thus, investors are resorting to it as a haven against economic disturbances. Nevertheless, online platforms make it easier for those to invest in digital gold. The main benefit is that one can sell digital gold at any time at the prevailing rate, offering a higher yield if done timely. At the same time, it also hedges against inflation and other external factors.