Gold Silver or Onion-TomatoImage Credit source: AI
Usually, whenever there is talk of inflation, the first thing that comes to people’s mind is the prices of tomatoes, onions, potatoes and pulses, but this time the signals given by the Reserve Bank of India regarding inflation are a bit shocking. According to RBI, at present the pressure on inflation seems to be coming more from the rising prices of gold and silver than from vegetables or food items.
In the February monetary policy meeting, RBI clearly said that even though the prices of daily essential commodities are mostly under control, the prices of precious metals, especially gold and silver, are affecting the inflation figures.
prices of food items
RBI says that in the current situation, food inflation is not a major concern. The reason for this is good Kharif crop, adequate grain reserves with the government and good sowing of Rabi crops. Due to all these reasons, the prices of pulses, rice, wheat and other essential commodities are expected to remain under control to a great extent in the coming months. This means that at present there is no major pressure on the common man’s plate. There is definitely a risk of sudden rise in vegetables like tomato and onion, but right now RBI is not considering it as a big problem.
Why worry about inflation?
The real cause for concern is core inflation i.e. the inflation which does not include food and fuel items. According to RBI, if gold is excluded, core inflation remained at around 2.6 percent in December, which is a safe level, but when gold and silver are included, the picture changes. The prices of these precious metals remain high, due to which the consumer price index is being affected and inflation figures seem to be going upwards.
Why are gold and silver becoming expensive?
Uncertainty has increased significantly across the world in the last one year. Due to war, geopolitical tension, fear of economic slowdown and fluctuations in the global market, investors are running towards safe options. In such an environment, gold and silver always become the first choice. Weak dollar, expectation of lower interest rates in future and fear of financial risks have further increased the demand for these two metals. For this reason, their prices in the domestic market also reached record levels, although in recent times there has been a slight decline in them.
RBI has also indicated that the prices of gold and silver are not only high, but tremendous fluctuations are also being seen in them. Sometimes a sudden sharp rise, sometimes a sharp fall. This instability is complicating inflation estimates. The same trend is being seen in international markets too, where investors are rapidly changing their positions according to the situation. This has a direct impact on the Indian markets.
What does it mean for the common man?
If we go to the bottom of the data given by RBI, then it can be understood that at present the fire of inflation is burning more in the jewelery counter than in the kitchen. Vegetables and grains are providing relief at the moment, but due to gold and silver becoming expensive, inflation numbers may appear high. RBI is confident that overall inflation will remain under control, but shiny metals may become a new challenge for policy makers in the coming times.