Reasons why gold rate fluctuates
Gold is seen as a safe and valuable asset across the world. However, gold rate fluctuation is common and can impact your buying and investment decisions. Let us look at the major reasons behind gold price fluctuation and what drives gold fluctuation price in India:
International market trends:
Global gold prices set the tone for local rates. Any major event in international markets can lead to gold rate fluctuation in India.
When the Indian rupee weakens against the US dollar, gold price fluctuation becomes more noticeable, as gold is traded globally in dollars.
During festive and wedding seasons, the high demand for gold causes a sharp gold fluctuation price across cities.
Gold acts as a hedge against inflation. When inflation rises, the demand for gold increases, leading to gold price fluctuation.
Lower interest rates make gold more attractive as an investment, contributing to gold rate fluctuation.
Government policies and import duties:
Changes in import duties or government policies can cause gold price fluctuation in the domestic market.
Keeping an eye on these factors can help you plan your gold purchases better and take advantage of price movements.
Impact of gold price fluctuations
The demand for gold loans is closely tied to the market price of gold. When you apply for a gold loan, the amount you can borrow depends on factors such as the weight and purity of the gold pledged, as well as the market rate of gold.
The changes in the market price of gold are an important factor in determining the baseline value of the gold loan. The loan to value for gold loan plays a crucial role here, as it represents the percentage of your gold’s value that can be borrowed. Fluctuations in the gold rate directly impact the loan amount you are eligible for. As per RBI regulations, Bajaj Finance considers lower of the previous day’s closing price or the 30-day average closing price published by IBJA or a SEBI-regulated commodity exchange to evaluate the loan amount against your gold jewellery, ornament or coins. The maximum LTV eligible for consumption loans per borrower depends on the loan amount and cannot be more than the limits given:
1. For loans up to Rs. 2.5 lakh = LTV 75%
2. For loans between more than Rs. 2.5 lakh to Rs. 5 lakh = LTV 80%
3. For loans from more than Rs. 5 lakh up to Rs. 2 crore = 85%
For instance, if you pledge gold with a current value of Rs. 1 lakh, the highest loan amount you can receive is Rs. 75,000. However, if we suppose that the price of gold increases by 5%, the value of the gold that was worth Rs. 1 lakh will now be worth Rs. 1.05 lakh. In this scenario, the LTV ratio of 85% would equal Rs. 78,750. In other words, borrowers can obtain a larger loan amount if the value of their gold increases.
Bajaj Finance provides gold loans at low gold interest rates, with easy eligibility requirements and minimal paperwork. The loan amount can be disbursed within a few just a few hours.
Before you pledge your gold, know your options. Check your gold loan eligibility and choose the right amount and tenure.
