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.
QE or Quantitative Easing is a monetary policy that governments and central banks globally use to stimulate the economy. Typically, this policy comes into action when other monetary policies become ineffective.
Under QE, banks start printing and injecting money into the economy by purchasing assets. This method ultimately swells up the bank reserves and lowers the interest rates, which, in turn, increases economic activities. The recession in 2008 witnessed the application of this theory worldwide.
Central banks in major economies like the USA, Japan, and certain European countries started enforcing this system to encourage banks to lend. This economic policy shares a close relationship with the value of gold.
This relationship is inversely proportionate. It means when the injection of the paper currency increases in a system, the price of gold drops. Even though the presence of additional money in the system may seem like the gold price is increasing, the reality is quite the opposite.
When compared with other papers assets like stocks and bonds, the price of gold remains mostly similar or may go down in certain cases.
A concept to know here is Quantitative Easing Tapering. It means when central banks decide to stop printing currency, it creates a vacuum in the system. Therefore, less amount of money is chasing the same amount of gold. Consequently, the price of gold skyrockets owing to the laws of supply and demand.
Indians have traditionally used gold for investment purposes. Gold is considered a hedge against financial disruptions. However, when you want to sell gold for meeting urgent financial needs, you should be aware of how old gold jewellery is valued. The right knowledge would keep you safe against unscrupulous jewellers. To calculate the value of gold, you have to take it to the nearest assaying or testing laboratory and get its weight and purity tested. The centre certifies gold's purity in Karat or percentage. To calculate the value of the old gold jewellery by the Karat purity method, you have to multiply the gold's weight, purity, and gold rate and divide it by 24. To calculate the value of the old gold jewellery by the percentage purity method, you have to multiply the gold's weight, purity, and gold rate and divide it by 100.
The price of gold in India depends on multiple factors. This includes, but is not limited to the following factors:
1) Gold production
3) Government's gold reserves
4) Demand and supply of gold in the global commodity market
5) Import rates
6) Interest rates
7) Taxes and levies
8) Local demand.
As a denizen and fellow gold loan borrower, it is imperative for you to stay updated about the latest gold rate in cityname. It is not unusual to find a little variation between the market gold price and the gold valuation offered by the lender. The difference in price primarily occurs because the lender calculates the average gold price of 22-Karat gold based on the rates from the past thirty days and extrapolates the gold gram rate. Hence, the value of the gold you get depends on the average gold price and the lender's loan to value ratio. As per the recent directive of the RBI, lenders can give loans of up to 90% of the gold's market value till March 31, 2021.
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