As we move into the digital age, even traditional investments in India like gold are getting a makeover. This is because gold investments have the unique ability to retain value and even grow during periods of economic turmoil. What’s more, the price of gold in India changes in line with inflation. This makes it necessary to know the daily gold price so that you can stay updated regarding the performance of your investment portfolio....Read More
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Gold Rate Trend in India
Common Factors that Determine Gold Prices in India
There is no fixed gold price today or any day for that matter, it keeps fluctuating in different cities in India. Ergo, the question comes, what determines gold prices in India – why is the gold rate today different, and every other day? Here are some agents that influence gold prices in India:
1. Supply:
Gold is a mineral that is not presently available in abundance. It is present in limited reserves across the world. Therefore, supply is an important factor that determines the current gold rate.
2. Import Price:
As gold reserves in India are limited and most of the gold is imported, heavy import duty is levied on the import.
3. US Dollar:
Gold is a commodity traded internationally. Not so surprisingly, gold has been a preferred currency in the transactions. Therefore, the gold rate today is highly influenced by US foreign exchange.
4. International Relations:
International relations between countries can have an effect on gold prices. As conflicts between global powers can create tension, it can also increase the gold rate.
What is the Difference Between Carat and Karat?
Carat and Karat have often been confused with one another as they are homophones. But they are different. A carat is a weighing unit used to measure gemstone size, gemstone such as a diamond. A karat, on the other hand, is a measurement unit stipulating the ratio of gold in an alloy out of 24 parts.
How are 22k Gold and 24k Gold Different?
The key difference between 22k -and 24k gold is that of purity and mixture. 24k is the purest form of gold available as it contains 99.99% gold. The 0.01% impurity is because 100% purity doesn’t allow maintenance of form and shape at room temperature. Owing to this fact, 24k is not used to make jewellery, instead is used to make gold coins and gold bars.
As for 22k gold, the proportion comprises 22 gold parts and 2 parts. The 2 parts are other metals, namely copper and zinc. 22k gold is often regarded as "916 gold" as it contains 91.67% pure gold. As for the texture, it is harder, more durable, and scratch-resistant, owing to the presence of metals and alloys in the composition.
Why is Gold Considered so Valuable?
Gold is regarded as a precious metal, not only in India but in the rest of the world. But the reason for the high gold rate today is solely not because it is used in making jewellery, or because it was used as a commodity back in the day. Gold is considered valuable because of these three reasons:
1. Gold has a Positive Relationship with Inflation:
Inflation has never made a man happy unless they have invested in gold. Gold’s price has always been on the rise, making it a go-to commodity. You can buy cold at the said gold rate today and sell it a few years later to earn a significant profit.
2. The Cost of Producing it is High:
Gold might not be a rare metal, but the problem lies in extraction. Gold is not easy to be found, extraction of gold in large quantities, according to the demand, and that too with pre-industrial technology is also an issue. Consequently, setting the base price is reasonably high.
3. It’s a Social Construct:
To face the blunt fact here, gold is a social construct that would have held no value or significance hadn’t it been for its place in the world’s history, and the perception people hold about the metal. Gold might be expensive to produce, but its demand owing to the perception and significance it holds makes it even more expensive. One of the reasons why the gold rate today is increasing and will continue to, making it a suitable investment.
How is Hallmarked Today Gold Rate Calculated in India?
Before we get into the discussion of how the hallmarked gold rate today is determined, the important thing to note is that there is no difference between the hallmarked gold rate and the normal gold rate today. No extra money is charged for hallmarked gold. The only difference is that a hallmarked gold ensures the purity of this precious metal.
In any case, buying quality hallmarked gold is advisable. In India, the quality of gold is determined at assaying centres. But there is a shortage of assaying centres in the country, and this needs to be addressed at the earliest by the government of India.
Why is Gold a Good Option to Invest in India?
When it comes to gold investment, people usually buy physical gold in the form of coins or jewellery. However, there are many other forms of gold investment in India. Each one can be a good option for you depending on the purpose of your investment. Here are some of the most popular ways to invest in gold: -
Physical gold - Buying physical gold means making a direct investment in gold according to the gold rate today. It is highly liquid; however, the downside is storage hassles and an increased risk of theft.
Gold ETFs (Exchange Traded Funds) - Gold ETFs are basically a dematerialized representation of physical gold. With Gold ETFs, one can buy proportionate ownership in a collective vault. 1 gold ETF is equal to 1 g of gold.
Gold Mutual Funds - This is where you make investments not in gold but in gold mining companies.
Digital Gold – Under digital gold, investors can buy and sell gold through fintech platforms.
Sovereign Gold Bonds – This type of gold investment was introduced by the Reserve Bank of India. As the name suggests, gold bonds are securities that are traded in the form of gold.
Gold Trading as a Commodity in India
Gold to this day remains a precious commodity. It is still one of the most effective investments that can be added to your portfolio. No matter the financial situation, gold has the ability to stand apart and beat inflation. It is seen as a differentiated asset that has proved itself in the past. People have made significant returns by investing and trading in gold.
Keep in mind that gold trading and gold investing are two different things. Trading in gold at the gold rate today means taking a position on underlying price variations, which means you won’t take ownership of the asset itself. If you are looking to trade in gold, you can do that on MCX. Multi Commodity Exchange (MCX), just like BSE, is the exchange for trading commodities such as gold, silver, and other precious metals.
Gold Futures Contracts on MCX
A gold futures contract refers to a legal binding agreement for the delivery of the gold at an agreed price in the future. The contracts are standardized by a futures exchange, where the quantity, quality, time and place are regulated, only the time is variable.
Gold futures are usually traded on the Multi Commodity Exchange of India (MCX). Let us take a look at the gold futures contract on MCX. Here are the four types: -
MCX gold futures –1 kg gold
Mini MCX gold futures – 100 grams gold
Guinea MCX gold futures – 8 grams gold
Petal MCX gold futures – 1 gram gold
Gold Weight Conversion Table
To Convert From
To
Multiply By
Tonnes
Troy Ounces
32150.7
Troy ounces
Grains
480
Kilograms
Tolas
85.755
Kilograms
Bahts
68.41
Kilograms
Troy Ounces
32.1507
Troy ounces
Grams
31.1035
Million Ounces
Tonnes
31.1035
Kilograms
Taels
26.7172
Troy ounces
Penny Weights
20
Troy ounces
Avoirdupois Ounces
1.09714
Avoirdupois Ounces
Troy Ounces
0.911458
Short Tonne
Metric Tonne
0.9072
Grams
Troy Ounces
0.0321507
Why is the Gold Price Increasing in India?
Gold prices keep increasing even though it pays zero interest. Investors love to hold physical gold compared to paper even if the interest rates are positive.
The gold rate today usually goes up when people get worried about inflation and the consequential risks in the financial system. Risk-averse investors put their money on gold in the hope that they will get a return on investment. Basically, gold has a lot of demand and limited supply. This makes the price of gold keep increasing in India.
What are the different purity levels in gold?
The gold rate today also depends on the purity of gold. Here is a quick overview of the different purity levels of gold: -
24K (100% pure)
It is the highest karat of gold with a purity of 99.99%. Since pure gold can be easily stretched and bent, it is impractical for daily wear. It has the highest gold rate today.
22K (92% pure)
This has a modest 8% mixture of alloyed metal, which make 22K gold stronger and more durable than pure gold. However, care needs to be taken since it is the softest form of mixed metal jewellery.
18K (75% pure)
18K is the most traditional mix of gold and alloys. This karat of gold has a deeper yellow tone compared to 14K, and is usually a sign of high-quality jewelry.
14K (58% pure)
14K gold offers more resistance to wear and tear than 22K or 18K gold. It is ideal for everyday use and is the most popular choice for wedding rings.
Which is a good investment option?
If you are looking to invest in gold and want to know about the best gold investment options available, here are the some of the major ones: -
Digital Gold
You can purchase this type of gold through various apps. It can be bought in denominations starting from 1 gram.
Gold ETFs
The Gold Exchange Traded Funds are traded on the stock exchange, just like equity shares. With Gold ETFs, you make investments in physical gold and stock of gold mining or refining companies.
Gold Mutual Funds
These are a type of mutual funds that are managed by various asset management companies. They all follow a fund of fund structure and mostly invest in Gold ETFs.
Sovereign Gold Bonds
These gold bonds are periodically released by the Reserve bank of India. They are available for purchase through various banks.
Frequently Asked Questions(FAQs)
The gold rate today differs in several states in India owing to several factors such as carriage, taxes, transportation costs, local association with jewellers, purchase price, and volume play (bulk buy).
Yes, inflation is one of the top determinants of the gold rate today in India. As inflation affects the production costs and transportation costs, the price of gold is significantly affected.
The import duty was slashed to 7.5 % in the last year’s budget, yet the effective import duty on gold remains 10.75% after several surcharges were imposed on it.
Gold rates fluctuate daily, if you have bought gold in the past, and wish to sell, checking the gold rate today is important. At the same time, if you are planning to buy gold, checking the gold rate today is essential as well.
The perfect time to buy gold is in the initial months of the year. On an average basis, gold price tends to surge during the first couple of months of the year. The price drops down a little through the spring and then increases again in the fall.
Gold schemes might not be worth investing in if your goal is to earn higher returns. Unlike gold funds wherein the returns can increase with a higher gold rate today, most gold saving schemes offered by jewellers provide you with the same fixed value of gold jewellery at the end of the term. Therefore, the ROI in these gold saving schemes is generally less than in Gold Saving Funds and ETFs.
A carat is a weighing unit used to measure gemstone size/ A karat, conversely, is a measurement unit used to refer to the ratio of gold in an alloy out of 24 parts.
18k, 22k and 24k gold are terms used to denote the proportion of gold and alloys. 18k gold has 75% of gold. 22k gold as it contains 91.67% gold, and 24k gold contains 99.99% gold.
Tola is a term in Hindi used to measure gold. 1 tola is equal to 11.663 of gold.
The returns earned from digital gold assets held for less than 36 months are not taxable. In the case of LTCG (Long-term Capital Gains), you would have to pay a 20% tax on the whole amount, an additional surcharge and a 4% cess.
Digital gold beats physical gold on nearly every front. In terms of cost, you have to pay an additional price for physical gold. The physical gold has the headache of storage and risk of theft. While digital gold has the same value, it does not have the risks of theft, etc.
In India, the quality of gold is determined at assaying centres.
Yes, 916 is used to show the purity of gold - 91.6 grams of pure gold in 100-gram alloy.
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