The price of gold has increased in the Indian markets Essay Example for Free

The determine of metallic has increased in the Indian markets EssayThe gold prices have been constantly increasing in India due to the spot expect before the marriage season, currency movements and the traditional investment patterns. The constant derogation in the Indian currency and a change in government policies ar supporting a steady rise in the price of gold. Earlier, there was a flat rate of Rs. 300 for 10g on gold. But now, due to the change in the government policy on import duties, 2% is aerated on 10g of gold.This change in the government policy will increase the import duties on the admixture to nearly a double, increasing its prices. florid is denominated in US Dollar change in the entertain of US Dollar will hence reflect the price of gold. The steady depreciation in the hold dear of US Dollar due to the ongoing recession has led to a weak foreshorten in gold in the global markets. If the price of gold is setd higher in any former(a) currency, it shows u s that the demand for gold is high and hence increasing its value. The below graphical record shows the depreciating value of gold due to the depreciation of US Dollar.http//www.kitco.com/LFgif/au0365nyb.gifEven though there is a weak trend in global markets, the price of gold has increased in the Indian markets due to the high crack up up on spot demand ahead of the marriage season. The price of gold has gained Rs. 25 from Rs. 28, 245 per 10 grams. ETF in India saw the highest net outflows in last 52 months. Investors observe recovery in melody markets which helped gold prices increasing.This high trend of gold in the Indian market can be explained as an exception to the impartiality of demand i.e. the increase in the price of gold is increasing the demand for the metal. Indians are the biggest buyers of gold in the world. Gold imports reached 958 tons in 2010, and in 2011 gold imports were still high disrespect the increase in prices. Gold can hence be considered a Veblen good . A Veblen good is unrivalled whose demand continues to rise in spite of an increase in its price level. Therefore the normal law of demand is non applicable here. Such goods are known as goods of conspicuous1 consumption because commonwealth discover them as status symbols and there is an inherent passion towards this remarkable metal.A normal demand influence slopes left to right downwards. But as shown in the diagram above, the demand curve slopes upward, and when the price of increases from P to P1, the quantity demanded increases from QD to QD1. Hence, gold can be considered as a Veblen good.Although, the prices of silver is approach a alter trend in both the Indian and the global markets due to the same ongoing recession. Silver has move by Rs. 800 from Rs. 57,700 per Kg in the Indian market and by USD 6.70 from USD 1704.60 in the global market. The below graph shows a fall in the prices of silver in the global market. In the Indian market, silver doesnt have high val ue status as much as gold. This is because people do not have a high inherent passion towards silver. Almost all electronics are configured with silver. The precious metal is used in everything from automobiles to alternative energy needs. But due do the reduced slay take by industrial units, silver is facing a fall in both demand and its prices.http//www.kitco.com/LFgif/ag0365nyb.gifEven though the weak trend in silver, the demand for silver coins has been the same as the people in India buy these coins for good luck and prosperity.In conclusion, gold and silver are both facing a weakening trend in the global market due to the world economic uncertainties. But, in the Indian Market, gold is having a high trend whereas silver has a weak trend. As gold is continued to be purchased high in India due to its snob value status.A Tighter Regulation1. Gold and silver are the two most popular commodities traded on Indian trade good bourses.2. FMC whitethorn consume exchange to tighten mo nitoring and receive weekly data on trade volume.3. National commodity exchanges say such measures will help strengthen investor trust in the market.4. The only downside of stricter regulation is that it may reduce bullion trading volumes.