Gold prices continued to surge last week. The price of 22-carat of gold surged 2,910 per 10 grams in a week, and the price of 24-carat gold surged Rs 3,180 per 10 grams during this period. The surge was attributed to the escalating Indo-Pak conflict, which dominated headlines last week.
However, in an exclusive interview with News24‘s Akshat Mittal, ex-Finance Secretary of India and former Executive Director at the World Bank, Subhash Chandra Garg said, “Gold prices are not driven by these kinds of conflicts.”
He also explained the factors that drive the price of the yellow metal. He said, “They (Gold rates) are more driven by central bank purchases, which have expanded in the last two to three years. That has led to price increases, partly because of the impounding of foreign exchange reserves by Americans, Russians, and others. So, there is a feeling: why should you keep all your reserves in USD? And if not there, where do you keep them? Here gold becomes one of the options. Keep your reserves in Gold, because it is something that is always cashable or convertible into foreign exchange.”
Garg further said, “Whenever the prices go up, people’s investment demand also goes up – not the jewellery demand, but investment demand. These both factors together are what have been driving prices.”
When Could Gold Prices See A Reversal?
On being asked, when can gold prices see a reversal, Garg said, “If the above given factors change, if the central banks stop purchasing gold, there would be a reversal in gold prices. So, I do not think this conflict between India and Pakistan has much to do with gold prices.”
