5 factors that influence price of gold

Gold acts as a diversifying investment as it has negative correlation to stocks and other financial instruments. When a crisis such as the covid-led one weighs on financial markets, gold often comes to rescue investors as a hedge to absorb the shocks in equity, bond and oil markets.

It is a hedge against inflation as typically the value of gold rises when the cost-of-living increases.

Gold is a crisis asset and retains its value through financial and geopolitical uncertainties. Last year, gold rallied majorly when equity markets had taken a massive hit, due to the effects of the coronavirus crisis. In such times, gold indeed shines bright.

A great advantage of gold lies in its liquidity. It is a highly liquid asset class, one can get loans against it easily too and use it to obtain urgent cash.

For investment purposes, there are several convenient and cost-effective ways that one can choose to invest in gold. Physical gold includes purchasing gold coins or gold bars from jewellers, banks or online stores (issued by MMTC), NBFCs etc.

Sovereign Gold Bonds (SGBs) are issued by the government of India from time to time. Whenever an issue is made, investors can subscribe.

Finally one can invest via mutual funds and ETFs. Units of gold ETFs are listed on the stock exchange and one can buy units from there.