Gold Price History in India

1. Introduction

• Importance of gold in Indian households and economy: Gold in India holds an economic as well as a cultural significance. It is regarded as a symbol of wealth and prosperity. From being used as an investment instrument to creating jewellery and utensils from Gold, the metal has a wide scope of uses.

• Why tracking gold price history matters: Tracking gold price history is extremely useful and important. By doing so, one can, to some extent, accurately estimate the future price movements, which is useful in determining whether an ideal investment plan is for individuals.

• Relevance of gold prices for gold loan borrowers and lenders: The Gold price is extremely important from the perspective of gold loans. The amount of gold loan that can be availed is directly proportional to the value of the gold collateral, which in turn is derived from the gold’s market price. A higher gold price means a higher amount of gold loan.

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2. Cultural and Economic Significance of Gold in India

• Gold as a store of value and symbol of wealth: In India, for many years, gold has acted as a symbol of wealth and prosperity. It is usually bought on an auspicious event like weddings and festivals, and is considered a purchase that brings luck and wealth.

• Role of gold in savings, weddings, and festivals: Gold, over the years, has proven to be a fantastic investment instrument. It has produced steady returns and is generally used by investors as a hedge against inflation. In India, it is also purchased in healthy quantities during the wedding season and festivals.

• Transition from ornament value to financial asset: During the early years, gold was typically used to make jewellery and ornaments. However, considering the exponential rise in prices, it is now looked at through the lens of a financial instrument.

3. Key Factors Influencing Gold Prices in India

• International gold prices: The gold prices in the international market are driven by the demand and supply forces of the market. The international prices have a major impact on the local prices as well, and essentially, these are correlated. Which means that a hike in the gold prices in the international market will result in an increased price in the local market too, and vice versa.

• Inflation and interest rates: Inflation, interest rates, and other microeconomic factors also impact the gold prices significantly. They have a positive correlation with the gold prices. I.e. an increase in inflation or interest rates can result in an increase in gold prices due to an increase in demand.

• Import duties and government policies: Import duties and government policies can also impact gold prices locally. An increase or decrease in the duties charged on the import of gold impacts the gold prices. If one were to check the gold rate history in India, then one would notice a sharp decline in the price level quite recently when the government decreased the duties in the year 2024.

• Geopolitical and economic uncertainties: Geopolitical tensions create instability in the financial markets, and during such events, investors flock towards a safer investment instrument like gold. Such events can give a boost to the gold prices globally.

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4. Gold Price History and Its Impact on Gold Loans

• Relationship between gold prices and loan-to-value (LTV): The loan-to-value (LTV) ratio and the gold prices together have an impact on the total amount that can be borrowed against the said gold collateral. An increase in either or both can increase the overall borrowable amount from the lender and vice versa. A low gold price 10 years ago meant a lower borrowable amount for the same collateral as compared to now that the gold price has increased considerably.

• How rising gold prices increase borrowing capacity: Since the gold price is directly related to the amount of loan that can be availed, an increase in the gold price can increase the total amount of loan that can be availed by the borrower against a particular gold collateral (Assuming that the LTV ratio offered by the lender remains constant). Lenders like indiagold offer industry-leading LTV ratios in India for their gold loan offering. Due to increasing prices, the gold price last year may have fetched a borrower a lower loan amount compared to what could be availed if the loan were availed this year, after the prices increased

• Effect of falling gold prices on pledged gold value: Since the gold prices and the loan amount are directly related, and as explained above, the increasing gold prices improve the amount of loan that can be availed against collateral, the same applies when the rates fall. If the gold rates fall, then the amount of loan that can be availed also falls. In such a scenario, many lenders may also trigger a margin call to the borrowers to pay back the difference to keep the LTV ratio in line with the lender's policy.

5. Why Gold Loans Become Attractive During High Gold Prices

• Higher loan eligibility against the same gold quantity: since the loan to value is tied with the value of the gold collateral, an increase in the value of the gold translates to an increase in the loan eligibility against the same gold collateral.

• Lower interest rates compared to unsecured loans: Gold loans being a secured form of loan in nature attracts a lower interest rate as compared to traditional unsecured loans like personal loans. Lenders like indiagold offers gold loans at a highly attractive interest rates.

• Quick liquidity without selling gold: Gold loans allows the borrowers to avail quick liquidity at a low cost without having to go through the hassle of selling the gold. Lenders like indiagold offers lightning quick gold loan application assessment and processing.

• Ideal financing option during emergencies: Since gold loans offers a quick source of funding, it serves as an ideal form of availing funds.

6. Historical Gold Price Trends: What Borrowers Can Learn

• Best times to take a gold loan: The best time to avail a gold loan is when the gold prices are at their all time high and are expected to go down in the near future. Although many borrowers mainly avail gold loan to fund an emergency, which cannot be delayed. However, if you are planning to avail a gold loan for a non-emergency need, then availing one during high prices is the way to go!

• Importance of monitoring price cycles: Monitoring price cycles helps in understanding whether the gold prices may go up or down. It also helps in understanding whether the current gold prices are at its peak or not. All this essentially helps in timing the purchase or timing gold loans well.

• Avoiding distress selling during low price phases: Doing so would have a negative impact on the value that you may have been able to derive from the sale. While gold loans is the perfect way to avail liquidity from underlying gold, however if you’re fixated on selling the gold then it is important to tie the market well and avoid selling during phases of low gold prices.

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