Impact of Gold on GDP Essay

Impact of metallic on gross domestic product In ancient multiplication, India was referred as Golden Bird and In the modern times, She has emerged as the largest consumer ot favourable in the world. The importance ot florid can be belowstood in the saying all glitters ar not lucky. Gold is an big participant in Indian culture, traditions and sparing policy. Gold has several applications or uses and the of import reasons why Indians take to meretricious are Gold is considered an equivalent for liquid funds Gold is passing liquid and portable as a Security or Asset.It can be converted to cash anytime when an emergency a shows and Is considered a friend In eed. Gold is considered as Status Symbol Especially in India gold tokenizes wealth. often, gold Is Important consutuent of the bridal wealth In the wedding. Indian weddings without gold are unimaginable. Gold is a very good investment Gold is an asset which has consistently increased in think of and thereby considered as a safe and secure Investment. Gold Is considered an effective diversifier which helps to reduce portfolio risk.Gold Is considered as a good gift item Gold is precious and worthy across all cultures and times. The gold Jewelry Is given as gifts during weddings, festivals and other pecial occasions. Gold has great religious significance Gold is the symbol of the Hindu Goddess Laxmi and considered highly auspicious. Gold is brought or presented on testivals like Dhanteras and Akshaya Tritiya. Toe rings are never made of gold as it represents the goddess of wealth and should not be soiled by touching a humans feet.Great Ornamental Value Women of every age and time have eer loved wearing gold ornaments. Moreover. Gold Ornaments are never out of fashiorn It overly may be remembered that Wedding rings are also traditionally made of gold to mark a huge asting relationship. Great value as Heirloom Gold jewelry is something which can be passed down from one coevals to the other as ancest ral property Not nevertheless In India, but In stick nigh of the world also, gold Is also one of the most valuable assets. Like most of the commodities, gold prices are also determined by demand and supply.The global demand for gold has many layers. For the last 5 years, Jewelry has consisted of of the overall demand for gold. The major players for gold jewelry with over of the demand are China, Turkey, and the center(a) East. Gold, as gold coins or bars, adds another 20% of the demand where the united states, India, and Europe play a vital role. Industrial demand lead by Japan makes up the last 12%. dig constitute 59 percent of the global gold supply, net official sales constitute 6 percent and recycled gold provides 35 percent ot the global gold supply.But many other factors also play their role In determlnlng the gold prices like dollar prices, crude oil prices, lump etc. as yet today, despite of US Dollar being acceptable in International trade, gold is button up consid ered the safest option. It is because ot this reason gold prices are otten attected by the change in Dollar prices. Anyone who follows the gold and currency markets well-nigh result realize that the IJS$ gold price and the Dollar Index for the most part trend In confrontation directions. I ne reason tnat gold ana tne collar generally trend In opposite alrectlons Is tnat In one respect gold is Just another currency.As a result, when the dollar weakens on the remote switch over market over an extended period then the IJS$ gold price will generally rise during the same period and when the dollar strengthens over many onths the IJS$ gold price will normally fall. There are, of course, leads and lags and theres no reason to expect that percentage changes in one will be accompanied by equal-and-opposite percentage changes in the other, but when charts of the dollar and gold are compared it cursorily becomes apparent that the two have been inversely correlated.On the contrary, gold p rices and crude oil prices tend to rise and fall verifyingly with one another. There are two reasons for this- historically, oil purchases were paid for in gold. Even today, a sizable percentage of oil revenue ends up invested in gold. As oil prices rise, a lot of the increased revenue is invested as it is surplus to current involve and much of this surplus is invested in gold or other hard assets. The second reason is that rising oil prices place upward insisting on inflation. This enhances the appeal of gold because it acts as an inflation hedge.Over the last 50 years or so, gold and oil have generally moved together in terms of price, with a positive price correlation of over 80 percent. Apart from above factors, gold also provides hedge against inflation and therefore there is a positive relationship between gold price and inflation. During times of economic growth there is an increase in wealth which leads to higher demand for luxury goods like gold. During times of economi c recession, gold can be used as an asset that protects against inflation and devaluing paper currencies.The reticence Bank of India ( rbi) has concluded the purchase of 200 metric tonnes of gold from the International Monetary Fund (IMF), under the IMFs limited gold sales programme. This was done as part of the Reserve Banks foreign substitute reserves management operations. RBIs decision to shore up its gold reserves needs to be seen in the ontext of other central banks across the globe increasing their gold reserves. In fact, the dowery of gold in Indias contribute reserves has dwindled over the decade. In March 1994, the share of gold in the total reserves of the country was 20. 6% by the end of June 2009, gold constituted only 3. 7% of the total reserves. The purchase resulted in increasing the share of gold in total assets of RBI to 6percent. RBIs foreign currency assets consist mainly of sovereign bonds, mainly US treasuries. So, purchasing more gold had helped the India n central bank to diversify its assets. RBIs foreign exchange reserves consist of foreign currency assets, gold, special drawing rights (SDR) which is an international reserve currency floated by International Monetary Fund (IMF) and RBI funds kept with IMF.India is the largest consumer of gold in the world, consuming around 18 per cent of the total worlds production. India has to import around 70 per cent of its total gold consumption, thus imparting a lot of foreign exchange to major gold producing countries. With the increase of the stock markets, especially on-line trading systems, urban India is lowly shifting its investment focus from gold to the other avenues of investment such as stocks, bonds, mutual funds etc, but, rural India still has its major investments in the form of gold.Around 65 per cent of the total demand for gold in Inala Is Trom people tangled In agrlculture ana alll around 30 per cent of the GDP of the nation. ea Inaustrles wnlcn contrlDutes to Thus gold is still as important for Indian economy as it was ever. Gold is also the important source of income for many least actual countries of Africa where countries like Mali, Ghana get majority of foreign exchange from the export of Gold.