Gold ornaments are great fashion accessories, but they also act as an excellent financial asset. You can rely on your gold when you need instant cash for a financial emergency or for liquidity purposes. You don’t have to sell your gold to get cash, as you can always pledge your gold ornaments to a financial institution and get a Gold Loan against them. Financial institutions view your gold as collateral and so, offer loans at a much lower interest rate as compared to personal loans. Learn more about Gold Loans and all its features by clicking right here.
However, when availing a Gold Loan, an important factor to consider is the bank’s gold per gram policy. This essentially tells you the loan amount you can get against your gold. Gold loan per gram is dependent of the gold rate per gram or the price of gold today.
How is Gold Price Determined?
Determining the price of gold is not an easy process; it involves several factors like supply and demand and investor behaviour. The key players of the market control market conditions to keep gold prices at a certain level
The price of gold is set daily. It is set by the London Bullion Market Association at 10:30 AM and 3:00 PM London time. The price is set in three currencies: US dollar, the Pound sterling, and the Euro.
Another point to keep in mind is that there are two types of gold prices. Spot price is the current market price at which gold has been bought or sold to facilitate immediate payment and delivery. On the other hand, Futures price is the price at which the parties to a futures contract agree to complete the transaction on the day of the settlement. Basically, spot price is the present price of gold, whereas Futures price is decided beforehand for a transaction that will be taking place on a future date.
It is important to know the sources of spot and Futures prices. They are as follows:
OTC Markets
OTC (Over the Counter) Markets are a decentralised market of securities that are not listed on any stock exchange. The participants of this market trade using phone, fax, and other technological means rather than the floor of a physical stock exchange. In such a market the dealers trade within themselves and decide the buying and selling prices. Thus, they are not under the supervision of any exchange and decide prices of gold through bi-lateral treaties. This provides confidentiality that investors require, especially when it comes to gold.
Large Banks and Bullion Traders
Bullion traders and larger banks trade large volumes of gold on behalf of their clients. Since they buy and sell gold as a part of trading practices, they can be considered to be a reliable source of spot prices for gold.
Futures prices are derived from Exchanges. Gold Futures are traded on all the major exchanges across the globe. These exchanges play an important role in determining the futures price of gold. The important exchanges for this purpose are:
TOCOM, Japan
MCX, Mumbai
Shanghai Gold Exchange, China
Istanbul Gold Exchange, Istanbul
DGCX, Dubai
COMEX, New York
Lastly, you should be aware of the drivers that determine the rate of gold. They are as listed below:
Indirect pricing due to the production cost. This relies on the prices of other commodities and their demand.
Inflation across the globe and the US, which is influenced by the rise of money supply.
The twin deficits that are a result of growth and trade imbalances against the US. These lead to the creation of a fear factor.
Activities of the Central Bank such as printing of money, purchasing and selling of gold, etc.
The real interest rates in the US compared to the inflation and wages. This leads to creation of a financial repression.
The usage of the production, or demand, or inventory formula in the form of demand and supply.
It is the amalgamated effect of all of these driving forces, key players, and other factors, that decide the price of gold. This price decided is then used by banks when you apply for a Gold Loan to determine the amount to lend against the articles pledged.
HDFC Bank Gold Loans
At HDFC Bank we understand the value of gold as not only a personal asset but even as a financial security blanket. Thus, we offer Gold Loans that allow you to fully realise the financial value of your gold articles. At HDFC Bank you can make use of idle gold and procure funds to meet your requirements. At HDFC Bank the price of gold per gram is decided according to the amount of gold offered, its value, and purity. You can avail of a loan starting at Rs 25, 000 with a rapid disbursal time of 45 minutes with HDFC Bank.
Explore the convenient Gold Loan offered by HDFC Bank and learn more about application process by clicking right here.
Wondering how to raise money with a Gold Loan? Click here to read more!
*Terms and conditions apply. Gold Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.