Gold Rates Today in India

There are a few factors that have a direct bearing on the determinants of gold prices in India.

Supply – The supply of new gold is not constant as in its natural form gold has become a scarce commodity, with just a few nations having generous reserves. This means we have to manage with the current quantity of the commodity out there in the market.

Prices can change sharply if the demand and supply equation changes and are always an important factor when it comes to determining rates in India.

Import rates – India’s natural gold reserves are falling and the country’s gold production is down to a trickle compared to the past. Most of the gold used in India is imported, making import duties an important factor in determining gold prices in the country.

US Dollar exchange rate – Gold rates are heavily dependent on how the US dollar performs since it is the standard of exchange in the international market. This relationship arises from the fact that gold is an internationally traded commodity and the US dollar is the preferred international currency. Any changes within the United States are bound to have an effect on gold prices, either directly or indirectly.

The fact that a majority of gold purchased in India is imported means that prices in India are also impacted by international markets.

International Relations – Tensions between global powers can push up rates. On the other hand, easing of sanctions can mellow the rates down. Overall global relations play a significant role in determining gold rates, primarily because gold is considered as a safeguard against geo-political instabilities.

Spot Price: London bullion market determines the per ounce price of 995k (99.5% pure) gold each day.

Bank transaction charges: These are bank’s margins added to the cost of gold that amount to around 0.2% of the cost.

(Adding spot price and bank transaction charges give us the metal value of gold.)

Custom duty: Custom duty and custom tariffs are levied on metal value of gold which in turn gives us the landed price of gold.

The Central Board of Excise and Customs (CBEC) publishes the custom tariffs fortnightly or when there is a change in spot price or currency exchange rate, A 10% custom duty is charged on this tariff.

(Landed price along with custom duty add up to determine the spot price of gold in India)

Market trends and government regulations: Market trends of demand and supply especially seasonal ups and downs on account of wedding season or festivals plays a significant role in determining the price of gold.

In addition to demand and supply, government policies of levying premium on imports or relaxing them changes the price of gold accordingly.

(The National Commodity and Derivatives Exchange Limited and the Multi Commodity Exchange of India Limited reflect the spot price of gold in India as a summation of all the factors stated above.)

Local taxes: After the spot price of gold is determined at the national level, variable taxes at the state level are added to the price. This includes the Value Added Tax (VAT).

The variability of rates in state level tax result in variability in the retail price of gold in different states.

Making and wastage charges: The last in the supply chain of gold are the making and wastage charges on coins, jewelry and bullion. This cost is the sum of profit margin, labour cost, wastage cost and business overhead cost.

These charges can be highly variable with respect to location of the retail store, availability of labour and cost of running the store, therefore, these charges are the primary reason behind difference in retail store prices.

There are several advantages to investing in gold.

Security: For starters, holding gold in physical form, such as coins or bars, gives one a sense of security and stability.

Inflation hedge: Due to its limited supply and finite resource status, gold is a well-liked investment choice because it serves as an effective inflation hedge.

Diversification of assets: A portfolio of investments can benefit from the diversification that gold can offer because it is not correlated with other asset classes like stocks and bonds.

Safeguard in an uncertain economy: In uncertain economic or market environments, some people turn to gold investments to safeguard their wealth.

The tax on gold investments in India is determined by the form in which the gold is held. For instance, there is no tax on the purchase or sale of gold if you invest in physical forms, such as gold bars or coins. However, you might have to pay taxes on any capital gains you make from the investment if you buy gold through a mutual fund or another type of financial instrument. Moreover, you have to pay income tax if you make money from gold mining or selling it.

Bureau of Indian Standards or BIS is the sole authority for hallmarking gold ornaments in India. Gold jewelry hallmarked by the BIS bears the BIS logo indicating that its purity is verified in one of its licensed laboratories.

BIS is the only agency in India approved by the government for hallmarking gold articles of any kind to ensure its purity.

Purity of gold can be checked in several ways but the most common ways include acid test or getting it appraised by a professional.

Acid test- An acid test entails putting a tiny drop of acid on the gold and watching what happens. If the gold is pure, the acid won't affect it in any way.

Getting appraised by a professional: Purity of gold can be determined by getting it appraised by a professionals, who use specialized tools and skills to determine its value.

On 29 July 2022, India witnessed the launch of India International Bullion Exchange (IIBX) in Gift City, Gandhinagar. The exchange opened up an opportunity for the long awaited 'one nation one gold rate' policy.

IIBX allows qualified jewelers and banks to import gold by paying international price without the intervention of intermediaries. This allows saving on freight charges and other marginal costs. Prior to the launch of the exchange, jewelers had to pay different prices in different states.

Directly importing gold through the spot exchange is advantageous for jewelers as it saves good money on margin payments. IIBX as an alternative channel for importing bullion in an efficient and transparent way ultimately benefits consumers since prices converge to a single point across the country.

Thus, the exchange has enabled taking a step forward towards ‘one nation one gold rate’ policy.

Gold mining is a global business with operations on every continent, except Antarctica, and gold is extracted from mines of widely varying types and scale. At a country level, China is the largest producer of gold in the world. In 2021 China’s production accounted for around 9% of total global production standing at 323 tonnes.

According to the data of World Gold Council, here are the top 10 gold producing countries of 2021-

According to the Goldhub data of World Gold Council, India imported 651.24 tonnes of gold in the fiscal year 2020-21. This was a substantial fall of 9.5% and 33.7% against 719.94 tonnes of gold imports for FY20 and 982.71 tonnes of gold imports in FY19 respectively. The fall in imports can be attributed to the Covid-19 pandemic.

India has been trying to regulate the import of gold since it has a direct bearing on Current Account Deficit (CAD) of the country. According to government data India witnessed a rise of 6.4% in Current Account Deficit (CAD) amounting to be $12.9 billion during April-July 2022 due to healthy gold demand.