Prelims – Current events of national and international importance.
Mains (GS II) – Economic Development | Issues relating to planning, mobilization, of resources, growth.
Why in News?
In the domestic market, gold breached the psychological level of Rs 1 lakh per 10 grams, while gold prices hit a fresh record high of 3,500 dollars per ounce in the international market recently.
- Tariffs imposed by U.S. - Experts attribute the global economic uncertainty caused by the tariffs imposed by US as the primary reason behind the recent spike in gold prices.
- US investors are also importing large quantities of gold from the international markets China, London, and other countries like to hedge against a potentially higher tariff regime.
- Fluctuations in Major currencies - Recent fluctuations in the values of major currencies, including the US dollar and the euro, have prompted businesses to invest in gold to hedge their currency assets.
- Surge in demand - The ongoing global tariff and trade war has led to a surge in demand for gold by investors, fund managers, and central banks alike.
- There is also a surge in demand for gold through Gold Exchange-Traded Funds, or ETFs, as these funds are attracting higher investments.
- Domestic reason – Gold prices have also risen in the domestic market due to the ongoing marriage season, which typically leads to a spurt in gold demand.
India is the 2nd-largest gold market in the world, after China. According to a World Gold Council report, the value of total gold demand in India increased by 31% in 2024, compared to 2023.
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Quick facts
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- Gold Exchange Traded Funds (ETFs) – These are investment vehicles that allow individuals to gain exposure to gold without needing to physically store or handle the precious metal.
- They are traded on stock exchanges like any other share, and their value fluctuates based on the market price of gold.
- Each unit of a gold ETF typically represents a specific amount of gold, often one gram.
- Exchange-Traded Fund – It is a type of investment fund that can be bought and sold on a stock exchange throughout the day, like a stock.
- ETFs hold a basket of underlying assets, such as stocks or bonds, and are designed to track a specific market index, sector, or commodity.
- They offer a diversified investment in a single trade and are often more cost-effective than buying individual securities.
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Reference
Hindu Business line | Uncertainty is driving gold prices
