The major factors that move gold prices are demand, supply, and investor behaviour. All these aspects have to work together to move the prices of gold. According to researchers and economists, inflation has nothing to do with the gold rates. In fact, when inflation in an economy takes a leap, gold isn’t necessarily the best metal to invest in. So the question is, “if not inflation, what exactly drives the price of gold?”

When the economic crisis happened, a majority of investors considered gold the best bet. During the period of the great recession, the prices of gold saw a major rise. However, the rates of this magnificent metal were already rising until 2008. The gold rates kept on rising even when the economy started to recover from the crisis. Gold prices reached its highest level in 2011 when it had gone up to $1,921. Ever since 2011, we have seen a drop in its rates. According to economists, gold rates follow the regular price elasticity aspect. When the demand for this metal increases, its price goes up. This clearly suggests that we cannot associate any underlying condition to the sudden increase or fall in gold prices. The more investors purchasing gold, the higher its rates get (no matter what the monetary policy is). However, gold is a global metal. If we see it from a global point of view, there can be multiple factors affecting the prices of gold. Let’s have a look at some common factors that moved gold prices.

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  • Supply

Gold has multiple uses. But the most common area where it is extensively found in jewellery making. Statistics suggest the demand for gold was around 4,071 tons in 2017 out of which only 332 tons of gold was used in the tech industries and 337 tons in investment. Around 2,135 tons of gold was used to produce the jewellery.

As there is already tons of gold in the world, its prices should decline. But that’s not what happens. Today, the jewellery industry is the leading consumer of gold. In developing countries like China and India, gold works as the store of value. People buy it and put it in their drawers. However, they never end up selling it unless they are undergoing a financial crisis. Even then, they put gold as their last resort. The demand for jewellery is likely to go up and fall (depending on the current gold rates). When gold prices are high, its demand falls, and vice versa.

  • Central Banks

Another gold price mover in the market is the central bank. When foreign exchange reserves increase, the central bank reduces the volume of gold it has. The main reason is that gold is a dead asset, which means it has no value or ROI for central banks.

Now the problem here is central banks want to trade gold at a time when investors are not willing to invest in this metal. But as gold seem the only accurate option during the crisis times, the central bank uses it regardless of its demand in the market. That’s the reason why prices of gold see a major drop.

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  • Portfolio Considerations

Gold may have little to no relation with inflation. However, it is still considered an important metal that diversifies the investment portfolio. The prices of the gold hit $2,000 in 1980 (which is, so far, the maximum rate). The investors who had purchased gold at that time would lose money. This is because gold’s rates have never gone beyond that. On the contrary, people who purchased this metal in 1983 and 2005 would enjoy profits. Besides, the rule of portfolio management is totally applicable here. For instance, if an investor wants 3% of the investment portfolio in gold, he must sell it when the price hikes and purchase the same when the price falls.

Final Words

The best way to know the factors driving the prices of gold is to look into the performances of different economies. How well the economy is doing, what is the supply and demand status of gold in these countries, are investors interested in buying gold and diversifying their portfolio. There are a lot of factors that can move gold prices. However, the factors listed above are the common ones.

Also Read: How To Learn The Reason Why Gold Prices Are Up 20% In India

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The Share Market A Guide to Trading (2)

The Share Market: A Guide to Trading – Gill Broking

It is, therefore, important to learn both the pros and cons of intraday trading to get a better idea of how this market works and how exactly you can grow your money. In this post, we will walk you through a few advantages and disadvantages of intraday trading. So, keep reading to learn more.

• Beware of fixed/guaranteed/regular returns/ capital protection schemes. Brokers or their authorized persons or any of their associates are not authorized to offer fixed/guaranteed/regular returns/ capital protection on your investment or authorized to enter into any loan agreement with you to pay interest on the funds offered by you. Please note that in case of default of a member claim for funds or securities given to the broker under any arrangement/ agreement of indicative return will not be accepted by the relevant Committee of the Exchange as per the approved norms.
• Ensure that pay-out of funds/securities is received in your account within 1 working day from the date of pay-out.
• Be careful while executing the PoA (Power of Attorney) – specify all the rights that the stock broker can exercise and timeframe for which PoA is valid. It may be noted that PoA is not a mandatory requirement as per SEBI / Exchanges.
• Register for online applications viz Speed-e and Easiest provided by Depositories for online delivery of securities as an alternative to PoA.

• Do not keep funds idle with the Stock Broker. Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms.

• Check the frequency of accounts settlement opted for. If you have opted for running account, please ensure that your broker settles your account and, in any case, not later than once in 90 days (or 30 days if you have opted for 30 days settlement). In case of declaration of trading member as defaulter, the claims of clients against such defaulter member would be subject to norms for eligibility of claims for compensation from IPF to the clients of the defaulter member. These norms are available on Exchange website at following link: NSE, MCX

• Brokers are not permitted to accept transfer of securities as margin. Securities offered as margin/ collateral MUST remain in the account of the client and can be pledged to the broker only by way of ‘margin pledge’, created in the Depository system. Clients are not permitted to place any securities with the broker or associate of the broker or authorized person of the broker for any reason. Broker can take securities belonging to clients only for settlement of securities sold by the client.

• Always keep your contact details viz. Mobile number/Email ID updated with the stock broker. Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly.

• Don’t ignore any emails/SMSs received from the Exchange for trades done by you. Verify the same with the Contract notes/Statement of accounts received from your broker and report discrepancy, if any, to your broker in writing immediately and if the Stock Broker does not respond, please take this up with the Exchange/Depositories forthwith.

• Check messages sent by Exchanges on a weekly basis regarding funds and securities balances reported by the trading member, compare it with the weekly statement of account sent by broker and immediately raise a concern to the exchange if you notice a discrepancy.

• Please do not transfer funds, for the purposes of trading to anyone, including an authorized person or an associate of the broker, other than a SEBI registered Stock broker.

• Do not deal with unregistered intermediaries (who are not registered with SEBI/Exchanges).

Names and contact details of all Key Managerial Personnel including Compliance Officer

Sr. No.Name of the IndividualDesignationContact NumbersEmail Id
1 Charanpreet GillCEO/
2 Charanpreet GillWhole Time
3 Charanpreet GillCompliance
4Manpriya GillDesignated
5Kewal GillDesignated

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