<p>This week, the price of a standard 10 gm piece of gold crossed the 6-digit figure mark in the Indian markets for the first time. Sumit Pande explains the reasons behind such insatiable economic demand for gold in India and abroad.</p><p><strong>Why is gold so precious?</strong></p><p>Of the 118 periodic table elements, gold occupies the pride of place. It has been the most sought-after element since time immemorial. Investment in gold carries no counterparty risk, making it one of the safest bets.</p><p><strong>Where is gold mined?</strong></p><p>China in 2023 mined 378 tonnes of gold and is currently the largest producer of the rare metal, followed by Russia and Australia. In comparison, Hutti Mines in Karnataka — the only one in India — produced just 1.5 tonnes of gold in 2023-24.</p>.Gold slips on Trump's Fed backflip, trade hopes.<p><strong>What’s the demand for gold in India and how is the supply met?</strong></p><p>India is the second largest consumer of gold, accounting for almost a quarter of the global demand, even though the domestic production is barely one percent. India sources its gold primarily from Switzerland, the UAE and South Africa.</p><p><strong>Where does all the gold go?</strong></p><p>Globally, about 50% of the gold is used for making jewellery, 10% is used for technology and industrial purposes, 30% is in gold-backed financial products and the remaining 10% is taken by various central banks.</p><p><strong>Is gold linked to currencies?</strong></p><p>From 1870 onwards, many countries opted for the Gold Standard, fixing the value of their currency in terms of a certain quantity of gold. In 1971, the United States delinked the dollar from gold, allowing its central bank to print more money in the face of economic downturns. Many other countries followed suit.</p><p><strong>Then why do central banks like the RBI buy gold?</strong></p><p>Gold remains one of the most crucial and dependable assets for central banks mandated with the task of stabilising their respective currencies. By investing in gold, the banks diversify their reserves. Gold, unlike currencies or legal tenders, is a finite and scarce commodity that keeps inflation in check if the central bank prints and supplies more currency.</p><p><strong>Has the RBI been buying more gold of late?</strong></p><p>The RBI has sought to diversify its reserves. The government has, however, maintained that it has been done not with an intent to move away from the US dollar as a dominant settlement mechanism. The RBI currently holds Rs 6,88,496 crore worth of the yellow metal. </p><p><strong>What has been the trajectory of gold prices?</strong></p><p>Gold has yielded stable returns. In 1971, a 10-gram 24-carat piece would cost less than Rs 200. At the turn of the century, the price of the same quantity of the yellow metal went up to Rs 4,400. In 25 years, the prices have shot up by 2,100% to cross Rs. 1,00,000.</p>
<p>This week, the price of a standard 10 gm piece of gold crossed the 6-digit figure mark in the Indian markets for the first time. Sumit Pande explains the reasons behind such insatiable economic demand for gold in India and abroad.</p><p><strong>Why is gold so precious?</strong></p><p>Of the 118 periodic table elements, gold occupies the pride of place. It has been the most sought-after element since time immemorial. Investment in gold carries no counterparty risk, making it one of the safest bets.</p><p><strong>Where is gold mined?</strong></p><p>China in 2023 mined 378 tonnes of gold and is currently the largest producer of the rare metal, followed by Russia and Australia. In comparison, Hutti Mines in Karnataka — the only one in India — produced just 1.5 tonnes of gold in 2023-24.</p>.Gold slips on Trump's Fed backflip, trade hopes.<p><strong>What’s the demand for gold in India and how is the supply met?</strong></p><p>India is the second largest consumer of gold, accounting for almost a quarter of the global demand, even though the domestic production is barely one percent. India sources its gold primarily from Switzerland, the UAE and South Africa.</p><p><strong>Where does all the gold go?</strong></p><p>Globally, about 50% of the gold is used for making jewellery, 10% is used for technology and industrial purposes, 30% is in gold-backed financial products and the remaining 10% is taken by various central banks.</p><p><strong>Is gold linked to currencies?</strong></p><p>From 1870 onwards, many countries opted for the Gold Standard, fixing the value of their currency in terms of a certain quantity of gold. In 1971, the United States delinked the dollar from gold, allowing its central bank to print more money in the face of economic downturns. Many other countries followed suit.</p><p><strong>Then why do central banks like the RBI buy gold?</strong></p><p>Gold remains one of the most crucial and dependable assets for central banks mandated with the task of stabilising their respective currencies. By investing in gold, the banks diversify their reserves. Gold, unlike currencies or legal tenders, is a finite and scarce commodity that keeps inflation in check if the central bank prints and supplies more currency.</p><p><strong>Has the RBI been buying more gold of late?</strong></p><p>The RBI has sought to diversify its reserves. The government has, however, maintained that it has been done not with an intent to move away from the US dollar as a dominant settlement mechanism. The RBI currently holds Rs 6,88,496 crore worth of the yellow metal. </p><p><strong>What has been the trajectory of gold prices?</strong></p><p>Gold has yielded stable returns. In 1971, a 10-gram 24-carat piece would cost less than Rs 200. At the turn of the century, the price of the same quantity of the yellow metal went up to Rs 4,400. In 25 years, the prices have shot up by 2,100% to cross Rs. 1,00,000.</p>