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“REASONS WHY GOLD PRICES ARE FALLING”

POOJA GAWANDE – PG02SNEHA DALVI – PG06

03/05/2023

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STATEMENT OF PROBLEM LIKELY RATE HIKE IN US LOWER FROM DEMAND CHINA STRENGTHENING DOLLAR LOW GLOBAL INFLATION NO DIVIDEND CENTRAL BANKS BUYING LESS

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LIKELY RATE HIKE IN US

US federal reserve raise interest rates on the back of an improving American economy.

Gold is a store of wealth for investors. With borrowing costs set to rise, commodities, such as gold,

are losing favour with investors, as higher returns can start to be generated elsewhere.

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LOWER FROM DEMAND CHINA Chinese had overtaken India as the largest consumer

of gold. China imported 36% more gold both on a year-on-year

and month-on-month basis, investors are parking their money in safe havens.

Because of Economic slowdown in china people are trading less in Gold Market.

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STRENGTHENING DOLLAR

The value of the US dollar typically follows an inverse relationship with commodities.

When the dollar strengthens against other major currencies, the prices of commodities - such as gold - typically drop.

When the dollar weakens, commodities generally move higher.

The main reason for this is because most commodities are freely traded in international markets and prices are quoted in US dollars.

Foreign buyers will purchase commodities with dollars, so, when the value of the dollar drops, they will have more buying power, and demand increases and vice versa.

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LOW GLOBAL INFLATION

Gold is a hedge against inflation. The easy-money policy after the 2008 crisis led to

fears of high inflation.  Inflation stayed low in the US, Japan and Europe. Investors are now reluctant to buy gold.

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NO DIVIDENDS Gold does not earn any interest or dividend.  If US raises rates, interest income from US bonds will

also rise.  So investors are preparing to move away from gold to

bonds.

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CENTRAL BANKS BUYING LESS

The largest gold buyers, central banks, especially from emerging countries, are buying less. 

They are pilling up dollars to counter outflows once the US raises rates.

 India's forex reserves in gold stands at 5%, down from 7% 5 years ago.

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GOLD RESERVE COUNTRIES

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IMPACT ON WORLD ECONOMY Gold is priced in dollars, so if the American currency

goes up, investors mark down the yellow metal accordingly.

The Yuan devaluation will affect India's exports not only to China but to other countries also with increasing competitiveness of Chinese exports.

The nuclear deal with Iran reduces the risk of war (which tends to boost gold). It also raises the chances of a broader agreement on other Middle East issues such as Syria.

The scale on which central banks are creating money out of thin air will eventually doom the whole edifice of international finance.

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CONCLUSION1. As its globalisation era every economy has its impact

indirectly on the worlds economy.2. Due to the current Greek Crisis as Chinese economic

slowdown had affected the overall international markets which also include commodities markets ,which has shown adverse effect on gold as its main commodity of the world as all countries of the world has there reserve especially gold and so the overall prices of gold are falling.

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OPINION As future prospects we feel that taking whole scenario

in consideration the Chinese economy Doesn’t seem to cope up rapidly in near future and so it feels that the gold prices would degrade more in long term.

The Current Price of Gold have gone up to Rs.26,013.

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CURRENT UPDATES Current Gold Prices Rs.26773 fall today.