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Why Gold price is Dropping - Find 7 reasons

Why Gold price is Dropping - Find 7 reasons



On 20 July 2015, Gold price in India has taken deep plunge and settled at the price which lowest in 2 years so far. There are many speculations are made that what is the main reason that gold price has gone down below to Rs.25,000 mark. Silver price also got affected in due course and gone far to down. However, July 11, 2015 has seen the biggest fall so far this year. One may find the 7 reasons why gold prices are falling across the world:


1. Curb on gold import: Tough measures taken by both the government and the RBI to curb gold import amid slowing investment demand against the backdrop of a strong rally in equities, which is emerging as a preferred investment asset class, are taking some sheen out of the yellow metal.


2. Higher domestic gold inventories: India was the top consumer of the metal in 2014 and the second biggest after China in the first quarter of this year. Higher domestic gold inventories is also having an impact on price movements of the yellow metal.


Read - Know how to calculate the gold price for each purity level

Read - Steps and ways to Check the Gold Purity


3. Concerns over monsoon: Demand for gold in India is also sluggish as concerns over a weak monsoon still remain. Farmers are key to the country's bullion demand. Nearly two-thirds of India's gold demand comes from rural areas where jewelry is a traditional store of wealth for millions who have no access to the formal banking system.


4. Massive selling in China: China on Monday dumped a huge amount of gold on the market, causing the price of the precious metal to fall drastically. Reports that China gold reserves were half the expected level added additional selling pressure on gold. According to reports, some 33 tonnes were sold in the Shanghai spot market on Monday as investors sought to shift focus to other avenues.


5. Stronger US dollar: A stronger greenback makes dollar-denominated commodities more expensive for buyers using weaker currencies. That tends to dent demand and, in turn, pull prices lower. In wider markets, the dollar hit a three-month high against a basket of currencies, making dollar-priced gold more expensive for holders of other currencies.


6. Worry over US Fed rate hikes: Gold has breached key support levels as the dollar gained after Federal Reserve Chair Janet Yellen told Congress last week that the Fed is on course to raise interest rates if the US economy expands as expected. A rise in US interest rates will attract investors to the dollar for higher returns, driving up its value.


7. Uncertainty in international commodity markets: Heightened uncertainty in international commodity markets amid geopolitical developments in the aftermath of Greek debt deal and the historic nuclear agreement between Iran along with the world powers too weighed on bullion trade.


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