Gold plays a crucial role in the economy of a country. In India, it is one of the prominent elements that undertakes approximately 7% of the total GDP of the country. The Indians are possessive about this precious metal. So, the common people of the country own the largest fraction of gold. As foreign exchanges depend mainly on gold, the price of the yellow metal is dynamic.
Moreover, the common mass of India often uses gold to take loans during economic emergencies. As the price of gold is dynamic, the gold loan interest rates fluctuate frequently. Several factors affect both the price and the gold loan interest rate in the country. The principal factors are discussed below:
- Condition of the Jewellery Market
Gold is a significant component of the jewelry market of India. High demand for gold is perennial in the market. The main reason for such a market scenario is because no Indian festivals or events are completed without gold. Furthermore, it is a gift item of top demand. So, the availability of gold in the jewelry market is a prime factor that affects its price in the country.
- Situation of Inflation
The worth of currency is dynamic, and so does the value of gold. Therefore, it acts as a leading asset that helps a bearer to avoid the adverseness of inflation. A plethora of investors always invest in gold as they can sell it when the prices are high in the market. This helps them to gain a decent amount of money, thus fight against inflation.metal.
- Gold Reserves by the Government
The Reserve Bank of India reserves some amount of gold as most central banks of leading countries do. It leads to the minimized supply of gold in the market resulting in the elevation of prices in the market. A global increase in the price of gold affects the price too.
- Gold vs. Dollar
The International worth of gold is determined against the worth of dollars. Thus, when the value of Dollar decrements, the value of Indian Rupee elevates. In such a situation, the price of gold experiences a boost up.
The rate of interest against the gold loan depends upon some critical factors. They are enlisted below:
- Bank Customership
The customers of a particular bank can get reasonable interest rates while opting for a gold loan against a certain amount of gold. The interest rates of the gold loan might be higher if it is taken from the various financing companies.
- Inflation affects the interest rates
Inflation is a common phenomenon in India. The rate of interest against gold loans experiences an increase with the increasing rate of inflation. If the rate of inflation is high, you might need to give higher amounts of interest.
- Interest rates fluctuate with collateral
Gold acts as a collateral when you take a loan against it. The rate of interest depends on the quality of gold that you keep in the bank.
Factors that affect gold prices & gold loan interest rates in India
You must always have a clear idea about the price of gold while investing in it. Try to have a distinct sense of the terms and conditions while taking a gold loan. Make sure to talk with finance professional before taking a gold loan. Furthermore, it is vital to check if the gold you are buying in any form is wholly original and devoid of impurities. It can fetch you decent gold loan capitals with reasonable interest rates.