Why Is Gold Cheap In Kerala?

Discover the factors that contribute to why gold is cheaper in the state of Kerala than in other parts of India. Read to know!

14 Jan,2023 09:35 IST 1859 Views
Why Is Gold Cheap In Kerala?

Gold loans are short- to mid-term financial instruments to obtain funds easily for multiple purposes. The loan amount offered against the market value of the pledged gold depends on the gold price on that particular day. Fundamentally, the rate of gold is determined by the international gold rates on that day. So, logically speaking, the gold rates should be the same everywhere. But this is not so.

Gold prices vary across countries. Even in India the prices differ across states and cities. Apart from international rates, the price of the yellow metal is determined by various other factors like demand and supply, import duties, and rupee-dollar exchange rate. In addition, there are a few more variables that add to the equation.

Here is a list of factors that determine the gold price:

• Inflation:

Whenever there is an elevation in the inflation level, the gold rate increases. Gold is used as an instrument to hedge against inflation, meaning its value does not fluctuate much during inflation. So, during inflation there is more demand for gold as it is a preferred asset rather than currency. Because of high demand, the gold rate goes up.

• Interest On FDs:

When interest rates on FDs rise, the gold prices fall because people invest less money in gold. On the contrary, with a decrease in the interest rates on FDs, the price of gold increases. This is because a lower interest rate is an opportunity for people to invest in gold, which generates a high demand eventually contributing to increased gold prices.

• Time Of Purchase:

During festivals and weddings, demand for gold increases and so does the gold rate. For example, the price of gold sees a steep increase around Onam in Kerala because gold is considered auspicious and an ideal gift to family members.

• Currency:

Gold rate largely depends on the global market. Currency fluctuations are caused by various factors, including monetary policy, imports, inflation, etc. The gold rate increases when the US dollar strengthens against the Indian rupee. This is because India imports most of its gold and pays in dollars. Accordingly, when the Indian rupee falls, importing gold becomes more expensive.

Gold prices, on a particular day, can be known from several financial websites. It can also be known by visiting any retail jewellery shop.

It must be remembered that gold rates at the state level differ as per the local taxes and transportation costs. One interesting fact is that gold prices in various southern cities are significantly lower than in the north and west.

In India, Kerala is one of the most significant gold markets. Presently, the gold rates in Kerala are the lowest for 22-karat and 24-karat gold.

How Is The Gold Rate In Kerala Calculated?

The gold rate in Kerala is determined by the All Kerala Gold and Silver Association on a daily basis. It is a group of gold merchants that decides the gold rate keeping in mind all the above factors.

The most important factor shaping the gold rate in Kerala is the international gold price. An increase in the global gold price also raises the gold rate in Kerala. In the last few years, the US dollar has been gaining strength against the Indian rupee due to which the gold rates in Kerala have increased.

In Kerala, the love for the yellow metal is evident in every Malayalee’s life. According to Commodityonline, a leading business journal, Kerala accounts for over 20% of India’s gold consumption. As the gold rates are the cheapest in Kerala, it is the best state for buying gold, both for consumption and investment.

Conclusion

Investment in gold can be in the form of gold jewellery as well as coins, biscuits and bars. It can also be done through gold mutual funds or through gold exchange-traded funds. But before buying gold one must ensure its weight and purity and avoid purchasing gold that is not BISmark-certified.

Gold rates change every day. So, to get the best deal you must check the highest and lowest gold prices before you decide to sell or buy gold.

Also, if you are facing a financial crunch, you need not sell your gold jewellery. Instead, you can pledge the gold jewellery with a reputed lender such as IIFL Finance and take out a gold loan.

IIFL Finance provides a fast and 100% transparent process for gold loans to meet your urgent financial needs. It provides the best value for your gold assets and offers competitive interest rates. Moreover, IIFL Finance keeps the ornaments locked in secure vaults and returns the pledged gold safely to the borrower after the loan is repaid.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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