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Home Gold News Unraveling the Rise in Gold Prices—is the India-Pakistan Conflict a Factor? An Ex-Finance Secretary Weighs In

Unraveling the Rise in Gold Prices—is the India-Pakistan Conflict a Factor? An Ex-Finance Secretary Weighs In

by changzheng47

Last week witnessed a continuous surge in gold prices. Over the course of seven days, the price of 22-carat gold spiked by 2,910 rupees per 10 grams, while the price of 24-carat gold soared by 3,180 rupees per 10 grams. Many attributed this significant increase to the escalating conflict between India and Pakistan, which dominated news headlines throughout the week.

However, in an exclusive interview with Akshat Mittal of News24, Subhash Chandra Garg, a former Finance Secretary of India and ex-Executive Director at the World Bank, offered a different perspective. “Gold prices are not driven by these kinds of conflicts,” Garg stated.

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He then went on to explain the actual factors influencing the price of the precious yellow metal. “Gold rates are more significantly influenced by central bank purchases,” Garg said. “These purchases have increased substantially over the past two to three years. One reason for this is that countries like the United States, Russia, and others have been taking steps regarding their foreign exchange reserves. As a result, there’s a growing sentiment among nations: why should all reserves be held in US dollars? And if not in dollars, where should they be stored? That’s when gold emerges as one of the viable options. Holding reserves in gold is appealing because it can always be easily converted into cash or other foreign currencies.”

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Garg further elaborated, “Whenever gold prices go up, it triggers an increase in investment demand. This isn’t about the demand for gold jewelry; it’s specifically about investment. These two factors, combined, have been the driving forces behind the price hikes.”

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When asked about when gold prices might reverse their upward trend, Garg responded, “If the factors I mentioned above change, and central banks stop buying gold, then we could see a reversal in prices. So, in my opinion, the conflict between India and Pakistan has very little to do with the movement of gold prices.”

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