In olden days, gold was considered to be a safe investment. Currently, gold price is sky-high and it is surprising that this price rise has come when the demand for gold is low. In India, the use of gold forms a part of the country's culture and tradition and is not considered as a mere investment. Before the liberalization policies, gold price in India was mainly based on domestic inflation, stock market performance and the demand-supply factors. But after the NEP, the Indian gold market was associated with international factors like currency exchange rates. The low interest rate in the economy can also be a reason for the increase in gold price. So, this price hike can be capitalized by investors by liquidating the part of the gold holdings. This is only a short-term phenomenon.
A variety of factors has connived to drive gold prices ever higher in recent months. But, if one word could sum up the whole thing, it is its uncertainty. Investors observe gold as a safe refuge in times of political and economic mayhem. Recent months have witnessed both go sky-high, as military tension mounted in Iraq and global capital markets continued to pine away in despair. Paradoxically, the surge in the gold price has come at a time when the demand for gold is at a remarkable low. This is possible, because the gold price is set by agents dealing with pecuniary derivatives in New York, London and Hong Kong, and not by the customers buying jewelry in the downtown of Doha.
The rush in gold price over the past 12 months flings a number of searching queries such as the reasons for the increase in gold prices, the likely manipulations for the region's gold industry etc. The answers to the above queries may be stated, that the price is being determined not by the actions of the users in their procurement and sale of physical products, but by the psychology of the shareholder and the investor.
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