Gold has always been the most secure commodity to invest in for many. Being widely used in India and in other central and east asian countries, Gold has always held a high standard of importance. From festivals to weddings to child birth or for no reason at all, we Indians love to gift gold ornaments as it has an auspicious value to it as well.
The commodity has always seen a rise in its price, however since January 2021, gold price are dropping faster than ever. On the Multi Commodity Exchange of India (MCX), gold prices dropped by Rs 457 to hit Rs 46,390 per 10 gram. Many people are wondering the reason behind this. There are 3 prominent reasons behind the decline as per various reports.
Along with other factors, the Central Government‘s decision to reduce the customs duty on gold and silver to 7.5% has also been one of the prominent reason in the decline of the price. Tp date, gold has witnessed a fall of more than 2%, and has dropped by more than Rs 7000 from all time high in August 2020. In the previous trade, the precious metal had closed at Rs 46,847 per 10 grams after a fall of Rs 661.
In August, gold prices had touched a record high of about Rs 56,200 per 10 gram on MCX.
Gain In US Dollors Against Other Currencies
Gold is traded against the US dollar globally and any fluctuations in the currency has an inverse affects on the metal. If the dollar gains, the price of the precious metal falls and vice-versa.
Since the Jannuary 2021, the US dollar has gained against almost all currencies barring the UK pound, Indian rupee and Chinese yuan.
Shift In Investor’s Preference
While the world was in a global lockdown for the majority of the 2020, investors moved to buying gold commodities. This marked as a surge in the prcies and recorded an all time high in the price of the metal in August 2020. However, with the economy picking up again, investors have shifted their investment in shares market in the view of excess liquidity in the system.
On 8 Feb’21, the Sensex topped 51,000 to touch 51,326, while Nifty also crossed 15,000 on February.
As per World Gold Council Managing Director-India PR Somasundarm, the market seems to have the appetite in picking up riskier assets now than to go for a safe bet like gold. And is unable to pinpoint why this trend is prevailing.