7 factors that influence gold prices in India

Rupee an important factor in gold prices

India imports gold. So, if the rupee falls from Rs 60 to Rs 61 against the dollar, Indians have to pay more for gold in the domestic markets. On the other hand if the rupee gains, Indians pay less for gold. If for example, the rupee falls from Rs 61 to Rs 58, gold will become cheaper, as long as international prices stay steady.

Import duty on gold was last raised

Addition of import duty on gold increases its prices. The government had raised the import duty on gold to curb imports, which has currently made the prices of gold more expensive in India.

Recent Russia-Ukraine tensions a classic example

Geo-political tensions across the world increases the price of international gold, which automatically increases the price of domestic gold. Recently, when there were tensions between Ukraine and Russia gold prices rallied, making it more expensive.

What central banks do is important!

Most of the central banks across the globe have invested heavily in gold. Any large scale selling by these central banks pushes the price of gold lower.On the other hand any large scale buying pushes prices higher.

Gold ETFs an important factor

A lot of investors change their investment strategy. For example, they would like to sell gold and buy equities. A large scale pressure tends to push gold prices lower. If some of the world's largest Gold ETFs see redemption, it could have a bearing on gold prices.

Global economic growth important

If the economic scenario around the globe gets worst people buy gold as it is considered a safe haven asset. On the other hand if the economic scenario improves, people will sell gold and buy equities. Post Lehmann Brothers investors heavily bought into gold and sold  equities.

Demand-supply another important factor

Gold consumption in many countries has dropped. For example, India which used to be one of the largest consumers of gold, saw a reduced consumption. When that happens gold prices fall.