Gold, often called the “yellow metal,” holds a special place in Indian hearts—not just as a symbol of tradition and wealth but also as a trusted investment. In recent weeks, gold prices in India have surged significantly, crossing the ₹1 lakh mark per 10 grams in some instances and hovering around ₹98,400 for 24-carat gold as of July 1, 2025. This sharp rise has sparked curiosity and concern among Indian households, investors, and policymakers. Let’s break down why gold prices are climbing and what it means for the average Indian.
Why Are Gold Prices Surging?
Several factors, both global and domestic, are fueling this price rally:
- Geopolitical Tensions: The world is witnessing heightened instability, with conflicts like the Israel-Iran tensions and the ongoing Russia-Ukraine war pushing investors toward safe-haven assets like gold. When uncertainty looms, gold becomes a go-to choice for preserving wealth, driving up global demand and prices.
- Weakening US Dollar and Rupee Fluctuations: A weaker US dollar makes gold cheaper in other currencies, boosting demand. In India, the rupee’s depreciation against the dollar (falling to 86.10 in June 2025) has further amplified domestic gold prices. When the rupee weakens, importing gold becomes costlier, directly impacting local rates.
- Central Bank Buying: Central banks, including India’s Reserve Bank of India (RBI) and China’s People’s Bank of China, have been actively increasing their gold reserves. In 2022, global central banks added 1,136 tonnes of gold worth $70 billion to their reserves, the highest in decades. This trend continues, signaling confidence in gold as a hedge against economic uncertainty.
- Inflation and Interest Rate Expectations: Gold is seen as a hedge against inflation, which remains a concern globally. Expectations of US Federal Reserve interest rate cuts in 2025 have also made gold more attractive, as lower rates reduce the appeal of interest-bearing assets like bonds, pushing investors toward gold.
- Cultural and Investment Demand in India: India, the world’s second-largest gold consumer, has a deep-rooted affinity for gold, especially during festivals and weddings. Despite high prices, demand remains resilient, with consumers adjusting to new price levels. Additionally, gold exchange-traded funds (ETFs) have seen inflows surge, with holdings rising to 63 tonnes in Q1 2025 from 21 tonnes in 2020.
How Much Have Prices Risen?
As of July 1, 2025, gold prices in India have seen significant increases:
- 24-carat gold: ₹98,400 per 10 grams, up by ₹1,140 per 10 grams in a single day.
- 22-carat gold: ₹90,200 per 10 grams, up by ₹1,050 per 10 grams.
- In major cities like Delhi, Mumbai, and Chennai, 24-carat gold prices range between ₹97,583 and ₹98,400 per 10 grams.
Globally, spot gold prices have climbed to $3,338.76 per ounce, a 27% gain in 2025, though prices have slightly retreated from a near-record high of $3,500 in April. In India, gold futures on the Multi Commodity Exchange (MCX) hit ₹97,165 per 10 grams, reflecting a ₹1,100 daily increase.
Impact on Indian Households
The gold price surge has a mixed impact on Indian consumers:
- Jewellery Demand: High prices have dampened retail jewellery purchases, especially in urban areas, as families find it harder to afford gold for weddings or festivals. However, cultural demand ensures that buying persists during dips.
- Investment Shift: Investors are increasingly turning to digital gold and gold ETFs for convenience and lower costs. Digital gold platforms allow purchases as small as ₹1, making it accessible to millennials and Gen Z.
- Wealth Effect: Indian households hold an estimated 25,000 tonnes of gold, valued at $2.4 trillion. The price surge has boosted household wealth, but it also raises concerns about affordability for new buyers.
Inflation and Economic Implications
Gold’s rising prices are influencing India’s economic landscape. With a 2.3% weight in the core Consumer Price Index (CPI), gold accounted for 17% of the rise in core inflation over the past year. This has distorted inflation readings, with core inflation at 4.2% in May 2025, compared to 3.4% if gold were excluded. The Reserve Bank of India faces a challenge in balancing growth and inflation control, as gold’s volatility complicates monetary policy decisions.
Should You Buy Gold Now?
Analysts have mixed views on gold’s outlook:
- Short-Term Caution: Some predict a potential dip to ₹94,100–₹93,300 per 10 grams due to easing geopolitical tensions and upcoming US economic data, suggesting a “buy on dips” strategy.
- Long-Term Optimism: Experts like UBS forecast global gold prices reaching $3,500 by 2026, driven by persistent geopolitical risks and inflation. In India, prices could stabilize around ₹97,000, with potential for further gains.
For investors, maintaining 5–15% of a portfolio in gold is advisable for diversification. However, a Morningstar analyst warned of a possible 30–40% correction if global tensions ease and the US Federal Reserve raises rates aggressively.
What’s Next?
The gold rally shows no immediate signs of slowing, but short-term volatility is likely. Key US economic data, such as employment reports and Federal Reserve signals, will influence global prices. In India, the rupee’s movement and festive season demand will play a crucial role. For now, gold remains a glittering asset, balancing tradition with investment appeal, but buyers should stay informed and cautious.
Stay updated with real-time gold price trends and consult financial advisors before making investment decisions.
Last Updated on: Tuesday, July 1, 2025 10:14 pm by Sri Hari Priya Rayaprolu | Published by: Sri Hari Priya Rayaprolu on Tuesday, July 1, 2025 10:14 pm | News Categories: News, India, Latest
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