How will the gold rate change in the future? | What are the factors which will affect the gold rates?

August 31st, 2010| News.

How will the gold rate change in the future? | What are the factors which will affect the gold rates?

Gold Rates

There will be difference in the gold rates internationally and in India according to the experiences. If we observe properly we can understand why the gold rate is increasing and what will the future of gold rate be. One of the reasons for the increase in the gold rate is that it had become the investment asset. In fact it is a speculative asset and there won’t be any fixed profit from the gold investments. If we invest the money in real estates, we can get the dividends, deposits, rents, shares etc but there are no such facilities in gold.  We are buying the gold to sell it for profit and that means we are speculating the gold. The gold rate is based on the dollar rate in the international market. The gold rate is directly proportional to the changes in dollar rate. The decisions on the investments are done on the estimations of the profits on the gold and government bonds in the countries like America, Japan and Europe. They immediately change the investments in to the gold if they think that the investments in the bonds are less profitable. If the bonds are more attractive, they change back in to the bonds from gold. The rate of the gold changes based on the dollar rate and Indian rupee in India. We should observe three phases in the international market to understand the changes in the gold.

  • The gold rate is 100 dollars between 1974-80 for one ounce (28 grams) and it had increased up to 850 dollars in 6 years. The reasons for this are Iran revolution and wars. The America had been weakened due to these reasons. They had estimated that the American dollar would not be as reserved money and then the investors had changed the investments to gold from dollars. And so the gold rate had increased suddenly and this was the reason for the increase in the gold rate in India also.
  • The gold rate had fallen to 257 dollars in 21 years from 1980 to 2001 which is decreased by 70% and the America had developed a lot. The dollar rate had increased to the top value. And so the investors had again invested in the dollars from gold. The gold rate had decreased in dollars but the rate had increased in rupees as the rupee value had increased from 7 to 46.
  • There are more changes in the dollar rate in 2001-2009. There was decrease in the interest rates in bonds and so the investors had again invested in gold. So the gold rates are increased from 257 dollars to 1200 dollars per ounce. The value of rupee is only 45-46 and so the gold rate had increased in rupees also when the dollar rate had increased.

What happens now?

India had got its position in the international finance market and there is a chance of increasing the value of the rupee.  If the dollar rate is reduced due to recession and the interest rates are decreased, then the investors will get attracted towards the bonds. Then the gold rate may decrease by 40-50% as the people start investing in the bonds. This is only estimation and the gold rate may depend on the dollar and rupee value.

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