# How gold rate is determined

Have you ever noticed how the price of gold keeps fluctuating? The gold rate today might rise or decline from what it was last week. Gold buyers and sellers closely monitor these price fluctuations to enjoy the best rates.

But why does the price of gold keep fluctuating? Keep scrolling to find out the factors that affect the gold rate in India.

## Demand and Supply

The demand and supply largely influence the gold rate in the domestic market. The price will be higher when the demand for gold exceeds supply. But the price will fall if the demand in the market is lower than the supply of gold.

## Interest Rate

The gold loan interest rate in India are monitored and changed by the RBI. It is done to manage the capital flow in the Indian market. In case of higher interest rates, gold sell-off will be heavy. It leads to increased supply which means higher gold rates. But the low-interest rates increase demand and lower gold prices.

## Economic Situation

People often invest in gold to hedge against inflation and recession. Any adverse economic factors lead to a fall in the financial market. In such a situation, investors have limited liquidity and more losses. That’s why they invest in gold because its demand increases in the domestic market.

## Rupee-Dollar Conversion Rate

If the value of the dollar increases against the rupee, it becomes expensive for India to import gold from international markets. Therefore, the price of gold also rises considerably in the Indian market.

## Mathematical Formula to Calculate Gold Prices

The gold rate in India can be calculated using two mathematical formulas depending on the purity of gold. The two formulas to calculate gold prices are as follows:

• ### Purity Method (Percentage)

Gold value = (Gold rate x purity x weight) / 24

• ### Karats Method

Gold value = (Gold rate x purity x weight) / 100

## Final Words

You will notice some fluctuations in the price of gold in the Indian market. But it is a lot less volatile than investing in the stock market. Investing in gold also ensures that you can mortgage it and get funds against it in times of need. So check out today’s gold rate and start investing now!

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###### Frequently Asked Questions Expand All

The purest form of gold costs the highest. The purest form of gold is 24 karat. Therefore, the cost of 24-karat gold is higher than that of 22-karat. But it does not mean that 24 karat is the best type of gold. Usually, 24-karat gold isn’t used in jewellery because it is soft and not much durable.

People usually prefer 22k or 24k for its high resale value. You should also check whether gold is pure and hallmarked to ensure that it has a high resale value.

If you are borrowing a gold loan, the price of gold in the market is an important consideration. When the price of gold is high in the market, you will be able to borrow a higher amount from your lender.

The spot price of gold is the per-gram price of the metal in the spot market. Investors can purchase gold from an MCX and hold the purchased assets in their portfolio.