'Karat' represents the proportion of gold present in an alloy. It indicates the fineness of gold, which implies that the higher the karat, the more the purity of gold.
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.
In its 3000 year history of trade, the price of gold has never dipped below zero. This is a very compelling fact when you pit gold against cash, whose value keeps is in a constant state of flux. This is only one of several reasons to put your gold to good use! Some of the other benefits of investing in gold are:
1) High Yield Returns: Gold is the best choice of investment if one is looking to make a low-risk investment for a high yield return.
2) Demand for Gold: In the wake of gold ETFs and Sovereign Gold bonds, the demand for gold has been constantly increasing.
3) Hedge Function- Gold functions as a hedging instrument against financial market fluctuations. This makes it a safe bet in the face of recession.
4) Liquid Asset- Being a liquid asset that can be transported and stored anywhere, gold can easily be sold or pledged against an instant loan.
5) Authenticity- Gold is a precious metal well known for its purity and value. This makes it easy to recognize high-quality gold which can simply be bought after verifying if the seller is authorized to do so.
Gold rates in India are determined by an array of factors. It could be the supply of gold in comparison to its demand both locally as well as globally, inflationary rates, the gold reserves present in the possession of the government, ongoing import and interest rates, taxes and levies. These are only some of the several micro and macroeconomic factors that could affect gold rates.
As a rational borrower with a personal stake, you need to be aware of the gold rate in cityname. There is almost always a variation between the gold price in the market as compared to the valuation that the lender offers. This is because lenders follow a unique way of evaluating gold. They arrive at the price by taking the average of 22 Karat gold from the past thirty days. Hence, your gold valuationdepends on this average price as well as the lender's loan-value ratio. Recently, the RBI has ruled that lenders can disburse loans of up to 90% of gold's market value until March 31, 2021.
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