The yellow metal is on a roller-coaster ride in India once again.
The price of physical gold, which dropped significantly after the U.S. Federal Reserve meeting on June 16, has begun to rise once again. In the last one week, the prices have climbed back around ₹1,000 for 10 gm of 24-carat gold, reversing half of the nearly ₹2,000-slip from the peak in June.
In June, it had witnessed the largest fall of 2021 after the U.S. Fed signalled an interest rate hike by 2023. The lack of demand in the retail market in India too contributed to the lacklustre performance.
So, what is pushing up the prices now?
The new banking rules, which are part of the sweeping international Basel-III norms that took effect on June 28, have defined allocated gold, in tangible form, as a zero-risk asset. On the flip side, unallocated gold or ‘paper gold’ or digital gold will have a higher risk weighting.