How Gold Price is Determined in India

• Firms doing exploration or development of gold

• Miners

• Recyclers

• Consumers

According to current market conditions, the London Bullion Market Association fixes gold’s international price to balance its worldwide demand and supply.

The Indian market depends largely on gold imports since the domestic production of this commodity is insufficient. Besides the international price, taxes and foreign exchange rates are also key influencing factors that determine gold price in India. 

• Import Charges

India has little gold reserve, and the overall domestic yield of this commodity is much lower. As a result, Indian gold market largely depends on importing this metal. It pays a considerable amount in import duties to other countries. This is why whenever gold’s import charges increase, the gold rate inflates simultaneously.

• Rupee-Dollar Conversion Rate

If Dollar price increases with respect to Rupees, India needs to pay more to import gold from the international market and vice versa. This is how Rupee depreciation can significantly escalate gold’s price and hurt the Indian market.

All these aspects exercise a direct influence on how gold rate is determined in India. In this regard, you also need to know that there is no particular entity that fixes the gold price within the country. Still, the Indian Bullion Jewellers Association (IBJA) performs a key role in setting day-to-day domestic gold rates.

IBJA is a domestic institution having several major gold dealers as its members. These dealers are responsible for most of the purchased and sold gold. The IBJA takes into account the average purchase/sell quotes of these members to determine the gold rate for a day.

 You can purchase spot gold from a trading marketplace (MCX) in exchange for money and hold your purchased metal instantly in your portfolio. 

• Futures Price

You can also purchase this precious commodity in a standardised futures contract. In this transaction, you agree to buy a certain amount of gold at the fixed futures price on or before a pre-determined date. Although you pay the price instantly, your gold is delivered to your portfolio after the pre-determined maturity date.

To conclude, although gold is less volatile than a company's stocks, its price changes every moment according to availability, the exchange rate of currency, etc. Therefore, now that you are aware of how gold price is determined, you can make informed decisions about your investment in this commodity and reap the maximum benefit out of the market.