Government Gold Reserve Affects Gold Price. How? Government of a country with their banks plays a keen role in prevailing gold prices in the country. As in India, Reserve bank of India, holds the right of supply of gold in the market. If RBI starts holding gold, the supply of gold will decrease in the market. In result, prices will go high. Similarly, with increase in gold supply, the prices will fall.
RBI decides the supply of gold in market by considering various economical factors at national and international levels.