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Why is the Price of Gold Rising in India

Now, today burning issue, "Why is the Price of Gold Rising in India rapid speed?" As student of finance, I did its small research and reached on some results.
Aim of Writing this Content 

1. India was the sparrow of gold. It means, when there was the big source of Gold in India, every home was decorated with gold. Now, why are we going to this bad situation. To know the reason behind this.

2. As per the culture of India, Gold is the pure metal. It does not destruct with the connection of water and air. There are also some scientific health benefits for wearing the Gold. That is the reason, every Indian men and women wore only Gold jewellery in the Ancient times. Gold was the sign of our prosperity. Still it is given to the woman on her marriage.  So, it should be cheap because one side it will go outside the capacity of poor and middle community and other side, there is not easy for small traders to deal in it and it will increase the unemployment of the workers who make its jewellery by their hands. All business will be shifted to big MNC. So, it is very necessary to control it.

Now, I come to the point. First of all See the table and chart in which you will find that the prices of Gold has increased within just 4 years. This trend is still continuing.

Prices of Gold in 4 years

Trend Chart of Gold Prices


Reasons of Rising of the Prices of Gold in India 

At National Level 

1. Taking and Giving the Loan on the basis of Gold

Yes, it is true. Taking and giving the loan on the basis of gold  is the main reason of rising the prices of gold. You may say that this loan can help anybody. Yes, this is true, if you have faced accident and you give your gold on the pledge and get loan for your treatment. At this time to take and give loan on the basis of gold is good. But all the person do not think good like this. Bad people want to increase the prices of gold, so that they can earn big in the small time.

a) Scheme of Bad People of India 

Suppose, all the bad people of India go to the goldsmith and get gold on credit. For example, they get the gold of Rs. 100,000 on credit. Suppose, this is the total gold of India which they bought from goldsmith on credit when the price of 10 gram. is Rs. 1000. Now, all these bad people of India went to the big companies who give the loan on gold. There are large number of companies which give 100% loan on the gold. They give all Rs. 1,00,000 gold to these companies and got Rs. 1,00,000 on the condition that they will give back the Rs. 1,00,000 and 10% interest on loan and they can get back their gold. These company will not have any  right to sell this gold up to one year if they do not pay the money. Now bad people give this Rs. 1,00,000 to goldsmith. Now, there is no gold in the Indian market. In India, at the session of marriage, there is big demand of gold. All good people who want to marry their children went to that goldsmith for buying the gold at Rs. 1000/per 10 gram for making the jewellery for their daughters. But goldsmith have no gold because goldsmith sell all the gold to bad people. In economics, it is called supply is zero and demand is unlimited. At that time, economics law will apply. If supply will zero and demand is unlimited, prices of that product will increase with high rate. So, this law applied on the gold. All good people went to bad people. They demanded gold. But bad people are really bad in real sense. They demand Rs. 31000 per gram of same gold. All good people are helpless. So, they bought the Rs. 1000 per10 gram gold at Rs. 31000 per gram.

Now, bad people earned the money

Net Profit of Bad People = Total Sale Price of Gold - Total Cost of Gold

= 31,00,000 - ( 1,00,000 + 10% interest of 1,00,000)

= 29,90,000

Net Profit % of bad people = 96%

Now, one day, you will see that bad people will sell this gold on 3100,000 per gram. At that time, they will get 9600% profit. This is the simple example of rising pricing in India. In India, there is Hard behavior, it means, when bad gays tell his bad scheme to the good people. Good people left their goodness and joined in the team of bad people. So, if we have to save the goodness in India, we have to punish all these bad people. Without this, we can not control the gold prices.

b) Scheme of Bad Companies of India 

Now, see the second angle of bad companies who give the loan without seeing the whether person is bad or good, they give them loan. So, all these companies are also responsible for increasing prices of Gold. These companies want to become rich by using double game. Suppose, all good people get loan from bad companies on the basis of loan. Good people are unable to pay back the same amount. At that time, these bad companies behave like above bad people. They will do what did the above bad people do. They will also sell the Rs. 1000 per 10 gram gold on the Rs. 40,000 per 10 gram with auction.

Finally,  I am not fearing to say both bad people and bad companies are the head and tail of one coin. So, we have to control them.

RBI's Action 

The measures include a loan-to-value (LTV) ratio not exceeding 60 per cent for loans against collateral of gold jewellery and a minimum Tier 1 capital of 12 per cent by April 1, 2014. It has also been stipulated that NBFCs should not grant any advance against bullion/primary gold and gold coins. It means, every gold of Rs. 100, loan company will give Rs. 60. With this, bad people will not success in their bad scheme. This is good step. Read the reference of RBI's monetary policy 2012-13's 94th point at here. In its 97th point, RBI will explain that it is the duty of the companies who give loan to know the full detail of person and his purpose before giving them loan on the basis of gold security.

At International Level 

If we see at international level, there are also good and bad people. Good people are buying the gold due to currency crisis, real estate crisis  , price inflation and stock market crisis. They understand that only investment in the Gold is the safe their money's value. So, they buy gold. With this, demand of gold have been increased.  This can also express from China's fund reserve policy.



On the other side, bad people also want to buy gold because they can sell it at it high price by blackmailing the consumer's basic need. If we solve the problem of price inflation, currency crisis, real estate crisis and stock market crisis, gold price problem will automatically be solved. Gold prices have big co-relation with all these crisis at international level.

a) If your faith will loss in the currency what will you keep currencies or gold. For example, India, price of basic commodities have increased at rapid rate. In future, if you have Rs. 1,00,000, its value will become zero because you will not buy anything from this. Gold was pure and will be pure. So, instead of keeping Rs. 1,00,000 in cash, keep it in the gold is better. So, this is the old trend. So, we have to find the reason of prices of basic need at international level. Because rising prices decrease the faith of currency. As Indian, from today, I have to join in the team for making strong my Indian currency. If all will join and Indian currency will be strong. Gold price will automatically reach at Rs. 1000 per 10 gram.

b) We also have to come out of getting loan trend. Today, I am 32 of age and it is my record not to take loan any cost. I have also faced several problems. But, it is not good to get loan to solve the problem. I give another example of this. Suppose, there is big don of the world. Whole country gets loan by giving gold to that don as security. Now, in the whole world, there is no gold. All these people who have taken loan from that don could not repay the loan. At that time, what will be happen. That don will sell the Gold at his own price. That don will be the king of the market. He will have the monopoly over the gold market. At that time, you will see gold in the hands of just 10% richest persons of the world whose list is published in Forbes magazine of rich people. Do you want this? No, then leave to take loan for fulfilling every need.

Related : Why is Rupee Falling against US Dollar?

COMMENTS

: 2
  1. Good and eye opener article. Keep it up sir.

    ReplyDelete
  2. Very smartly the author has tried to figure out the reasons of increasing price of Gold in India.

    ReplyDelete
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Accounting Education: Why is the Price of Gold Rising in India
Why is the Price of Gold Rising in India
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