Investment has a role in the economy of any country. It helps to grow the economy by providing capital for business and creating jobs for people. Investment is also considered a source of economic growth. Gold, as a precious metal, is also an investment item and is considered to be an asset because it earns profit
Till last year many Indians were buying gold, which was in demand not only within the country but from the international market too. People who were waiting for fat returns from gold bought the yellow metal. This was clear from metrics like gold rate Mumbai or Bangalore. But now gold prices have fallen down to their lowest level and are continuing to decline further. Sometimes referred to as “The Golden Bird”, India’s tremendous demand for gold means the country must trade in its economy and its currency for the metal.
The purchase of billions of dollars worth of gold from foreign dealers has disrupted the balance in funds, bringing down the value of the rupee and costing the nation thousands of jobs. Additionally, it has also made thee imports extremely expensive thereby making it difficult to pay off the international loans.
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Used for saving
Gold is one of the oldest forms of investment instrument. It has been used for thousands of years as a means of saving and securing wealth.
Moreover, it has been an accepted mode of payment since time immemorial. This can also be attributed to the fact that it holds its value better than any other form of asset or currency. When you invest in gold, you can rest assured that your investment will not depreciate in value over time and will be worth much more when you are ready to sell it. Gold is also the best way to save for the future. It is one of the most secure and safest ways to save money. If you look up gold rate today in Agra or Lucknow, the stability of prices will show you how it is a safe investment. See more.
However, this gold is typically stored and doesn’t contribute to the growth of the economy
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Used for jewellery
The main reason behind this demand for gold is its cultural value in India. Gold forms an integral part of many Indian wedding ceremonies and rituals and hence is considered sacred by many. During festivals such as Diwali, Dussehra and Holi, people gift each other costly and heavy pieces of gold jewellery. The increased demand for gold jewellery during festivals like Diwali also creates artificial scarcity in the market during these times and forces people to purchase more than necessary, thereby increasing prices further. In addition, weddings are also becoming more expensive nowadays which, again, leads to high gold prices. This surge in demand has, in turn, put extra pressure on the country’s currency
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Burden on CAD
The Current Account Deficit (CAD) refers to the difference between inflow and outflow of foreign exchange for an economy. This figure represents the amount that a country’s currency depreciates annually against foreign currencies. It can be calculated by subtracting exports from imports, or it can be calculated by subtracting income from the expenses of a nation. Hence as the gold imports increase the country’s CAD also increases making the economy weaker.
