Gold Prices Expected to Rise Due to Middle East Crisis and Festive Season in India
Gold prices are predicted to increase by 9.9% this year, following a 10.2% rise last year, largely due to the Middle East crisis involving Iran and Israel. The demand for gold is driven by geopolitical tensions, central bank purchases, and festive season buying in India. However, a recent reduction in import duty in India has caused a temporary price drop.
Gold is considered a safe-haven asset, retaining or appreciating its value during times of turbulence. Historical trends, such as the surge during the Russia-Ukraine war, highlight gold’s role as a safeguard against inflation and market instability.
Gold’s diverse uses in jewelry, technology, and by central banks and investors mean different sectors of the gold market rise to prominence at different points in the global economic cycle. This diversity of demand and self-balancing nature of the gold market underpin gold’s robust qualities as an investment asset.
In India, gold has strong cultural and religious significance. According to the World Gold Council, India is one of the largest consumers of gold jewelry, accounting for about 25% of global gold demand. The demand for gold in India is primarily driven by weddings and festivals, making it an integral part of the country’s culture and traditions.
The regulatory landscape for the gold industry in India is fragmented, involving multiple circulars and notifications from various authorities such as the RBI, Ministry of Finance, Ministry of Commerce, DGFT, Customs, and others. This patchwork of regulations leads to confusion, inefficiency, and difficulty in compliance.
Doubts Revealed
Middle East Crisis -: The Middle East Crisis refers to conflicts and tensions in the Middle East region, like the one between Iran and Israel. These conflicts can affect many things, including the price of gold.
Geopolitical tensions -: Geopolitical tensions are conflicts or disagreements between countries. These can make people worried about the future, so they buy gold as a safe investment.
Central bank purchases -: Central banks are big banks run by countries. When they buy a lot of gold, it can make the price of gold go up.
Festive season -: In India, there are many festivals like Diwali and Dussehra. During these times, people buy more gold for celebrations and gifts.
Import duty -: Import duty is a tax that the government charges on goods brought into the country. If this tax is reduced, it can make gold cheaper for a short time.
Cultural significance -: In India, gold is very important for traditions and ceremonies, like weddings. This makes people buy a lot of gold.
