Investing in gold has been an age-old practice, as is selling gold during financial emergencies. With the Indian market providing myriad options to sell gold, investors tend to trade this precious metal for money when there is a dire need.
When discussing the gold retail landscape, this yellow metal contributes to over 1.3% of the GDP in India. However, with the constant demand for gold in the economy, India had to import gold worth ₹3.4 trillion. This paved the way for the country’s trade deficit that required the Government to reform the gold import policy in India.
Understanding The Current Status Quo
Gold purchases continue to soar high, especially during festival and wedding seasons. Considered one of the most precious metals globally, many also see it as a viable investment. This is because there are several easy liquidity options.
However, as an investor, you have other options too. Instead of selling this asset, you may also apply for gold loan. While the prevailing gold loan interest rate dictates the opportune time to apply for a gold loan, it proves the versatility of this metal.
In instances where you opt to convert your gold into cash, it is important to understand the impact of the existing economic conditions. Selling gold at the wrong time may not fetch desirable returns. To inform the process, here are a few key indicators to consider when you plan to sell gold.
1. When the Value of the Dollar Depreciates
This is one of the prominent indicators of deciding the right time to sell your asset. While this investment acts as a hedge against market fluctuations, selling gold when the dollar value weakens can fetch reasonable rates.
Furthermore, know that there is a significant correlation between the US dollar and the Indian rupee. This has a high impact on gold rates too. For that, you need to understand that gold is primarily an imported product.
So, when the dollar value declines compared to the rupee, there demand for gold in the Indian market increases. As there is a high demand, the gold rates also increase considerably.
Selling your gold at this point can help you get more funds than expected. Plus, you may also earn better returns as compared to the original value of gold at the time of purchase.
2. When There is Economic Uncertainty
During uncertain market conditions, buying gold is the right strategy, as this yellow metal holds better value when compared to bonds and stocks. The value of other market-linked investments may decrease when an economy gets crippled.
Similarly, selling gold during downturns can get you good returns. For this, it is advisable to study market conditions carefully, as it can help you decide the right time to sell gold. Check out for instances when stock markets crash or a high recession in the economy, as selling gold at this point can be beneficial.
3. When the Demand for Gold Increases
Ideally, the value of gold depends on the demand and supply chain in the economy, as mentioned earlier. So, when there is more demand for gold than supply, the gold rates also increase.
On the contrary, when there is high availability of gold, the gold rates tend to decrease. Hence, it is the best time to sell your gold asset during this period. A few situations hinting at a higher demand for gold than supply include:
- If investors buy gold Exchange Traded Funds
- If the RBI purchases gold
- If there is an increasing demand for jewellery in India
Similarly, when there is a surplus production of gold, or many investors sell their gold, these are clear indicators that supply is higher than demand. So, refrain from selling gold during this period.
4. When There is a Requirement for Emergency Funds
As discussed earlier, many prefer to apply for a gold loan during financial emergencies. This makes sense as lenders have flooded the market with solutions. As such, you are often spoilt for choice. But you need to consider the gold loan interest rate before you apply for a gold loan.
With high gold loan interest rates, repaying the loan can become quite a task. An easy way to avoid this is to sell your asset immediately. While you may not get excellent value for your asset, selling gold provides a reliable income source that can help you sail through tough times.
Way Forward
Hence, selling gold is one of the ideal ways to improve your financial standing in a challenging economy. And when the situation improves, you can always invest in gold in the future!
While the various indicators mentioned above can help you assess the right time to sell gold, you must be aware of this commodity’s spot and bid price. Depending on the demand and supply in the market, the spot price of gold changes rapidly.
Knowing this is essential as the spot price is considered a reference point for calculating the final rate of the gold. Similarly, you have to be equally aware of the bid price. Again, this is essential when planning to sell your gold online.
Simply put, the bid price is the highest value online gold buyers are likely to pay for your gold. Online buyers fix the bid price of old gold after combining the spot price and purity. Finally, monitoring the gold rates can help you get the best value when you sell your asset. You should sell gold when the gold rates are high as this helps you capitalise on the investment.
Likewise, low gold prices indicate that you must wait before selling your gold. On the contrary, when the emotional value of the asset prevents you from selling it, you can always apply for a gold loan. When you apply for a gold loan, select a lender offering nominal gold loan interest rates that can help you easily tackle your repayment hassles.
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