On what basis forex rates are changing everyday. What are the measurements to change gold rates regulary. Why gold rates and fuel rates are increasing regularly.
Forex rates change because of various factors : primarily purchasing power parity, relative interest rates, trade imbalances, political instability, government intervention and speculators.
Change in gold rates are based on market supply-demand forces similar to stock markets. They are determined mainly in commodity exchanges.
Gold rates and fuel rates are increasing regularly because both are limited resources with limited supply and high demand. So unless, new resources are discovered and exploited, or consumption of gold and fuel is reduced significantly or substitutes are discovered for fuel, prices are bound to rise.
Regards,
Jagrut
Bhaskar Unnikrishnan CPA CMA
(Accounts / Administration)
(414 Points)
Replied 07 September 2011
Dear Jagrut,
Your explanation is correct in priciple, but reality is:
Basically Oil rates are controlled by a to a great extend by Cartel (Formal organisation of producers who control production and make sure that price would not fall beyond limit eg. De beers for Diamond and Opec for oil). It is basically illegal because it reduce competion. OPEC members meet regularly and decide to limit or increase production according to economic situation.
In case of Gold, Dollar is weak, so as Euro and Real Estate business and investment firms are haunting for safe investment, according to present scenerio, Gold is better option, but as per recent report by FED. Reserve, Gold market is a bubble ready to blow any time, and crazy thing is Indian Gold market expect price may reach Rs 40,000/8gm in couple of years.
Bhaskar
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