Karat is the term that is used internationally to indicate the purity of the gold. The karat rate is directly proportional to the purity of the gold. As the karat increases, so does the purity of the gold. The difference between a 24 karat, 22 karat and 18 karat golds are explained below. The 24 karat gold is the purest form of gold that is available. Because of its purity, rather than using it to make jewelry, it is used for investment purposes. The 24 karat gold exists in the form of gold coins or gold bars. The 24 karat gold is followed by the 22 karat gold which is used to make jewelry. The 22 karat gold is a mixture of gold with alloys such as zinc, nickel, or silver. These alloys make the gold harder and fit to be fashioned into jewelry. The purity of the 22 karat gold is 91.67% pure. The 18 karat gold is the cheapest gold that exists. It is a mixture of 75% gold and 25% alloys.
If there was another indicator to measure wealth in the world, barring currency, it would be gold. It is one of the nine noble metals, but gold’s value in the economy surpasses that of its counterparts. But the exploration and extraction of gold is a slow-moving, laborious process.
However, this metal still has a readily available market across the globe, which increases its liquidity, thereby making it an ideal asset. Owners of gold articles have the freedom to convert them into cash with ease.
Moreover, gold is a luxury good, which means that people purchase it in larger quantities when their income rises. Therefore, this yellow metal generally exhibits a steady increase due to high demand and inadequate supply, especially in a country like India. Most free-market economies of the world use gold reserves to hedge against inflation. As a result, this metal possesses an intrinsic value in the global economy as well.
The intention behind applying quantitative easing is to counter the situation created by an economic slump. Typically, during an economic downturn, the demand for credit goes down and deflation hits. Even though central banks around the world use interest rate manipulation to tackle such situations, QE is usually their last resort.
Points to Know about QE
The relationship between QE and gold is inversely proportionate. It means when money is injected into the system, the price of gold goes down. Although extra money makes it seem like the gold prices are soaring, that isn’t the case.
With the implementation of this tactic, the gold prices largely remain the same, grow but at a slower pace, or even go down during certain instances.
Here Quantitative Easing Tapering is also vital to know about. It means when a central bank agrees to stop new currency printing, which results in a shortfall in the system. So, the flow of cash goes down, but the amount of gold remains the same. Hence, the price of gold increases steeply.
There are several reasons to put your gold to good use. For starters, people are always looking for the best way to generate high returns. On that note, gold has forever been the conservative investor's best avenue for yielding high returns. With the introduction of Gold ETFs and Sovereign Gold Bonds, the demand for gold has been steadily increasing. The top advantage of gold against cash is that the gold gram rate has never dipped below zero in it’s more than 3000-years' history. Gold also functions as a hedge against financial market fluctuations. Hence, whenever there is a recession, people move towards gold. Additionally, gold is a liquid asset, which means you can either sell it or pledge it in exchange for instant cash loan. Unlike physical money, gold is portable and can be stored anywhere. Lastly, identifying high-quality gold does not require expert understanding. Anyone can buy gold according to its purity while the seller's certificate acts as the proof of its purity.
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