Unprecedented Surge in Gold Prices: Reasons, Indian Market & Future Trends

What’s in Today’s Article?

• Gold Prices Surge Latest News
• Reasons Behind Gold Prices Crossing ₹1 Lakh-Mark
• Indian Gold Market: Size and Significance
• Gold Prices Surge FAQs

Gold Prices Surge Latest News

• Gold prices have crossed ₹1 lakh per 10 grams for the first time, driven by a surge in international markets after US President Donald Trump announced plans to overhaul the Federal Reserve. 
• In Mumbai, 24-karat gold was priced at ₹1,01,350 and 22-karat at ₹92,900 per 10 grams. The rise reflects gold's status as a safe haven amid global market volatility, concerns over Trump's tariff plans, and potential inflation due to Fed changes.

Reasons Behind Gold Prices Crossing ₹1 Lakh-Mark

• Surge in Global Gold Prices
  • Gold prices have surged globally, crossing $3,400 per ounce, contributing to a significant rise in India. 
  • This surge is attributed to a weakening US dollar, making gold more affordable for foreign currency holders.
    • The US dollar continued to weaken, falling to its lowest level since 2022. As tensions between Trump and the Fed mount, global investors are retreating from US assets. 
    • A weaker dollar boosts gold demand, as it becomes cheaper for international investors.
• Uncertainty Surrounding US Monetary Policy
  • The rally is fueled by renewed uncertainty over US monetary policy, following President Trump’s plans to overhaul the Federal Reserve.
    • Concerns about the Fed's independence have created uncertainty in financial markets. 
  • His criticism of Fed Chairman Jerome Powell and calls for lower interest rates have intensified market concerns.
• Geopolitical Tensions and Inflation Concerns
  • Escalating geopolitical risks, such as tensions over Russia-Ukraine, and persistent inflation fears are also driving gold's safe-haven appeal. 
  • The US Federal Reserve has warned that tariffs could disrupt its economic objectives, further supporting gold demand.
• Central Bank and Institutional Demand
  • The gold rally is further supported by increased buying from China, global central banks, and institutional investors, as well as growing concerns over the US economic outlook and debt crisis.
• Analysts Insight
  • Analysts highlight that escalating tariff tensions, the uncertain US economic outlook, and continued buying activity from major global players are adding momentum to gold’s upward trajectory.

Indian Gold Market: Size and Significance

• India is the second-largest gold market in the world, following China. 
• In 2024, gold demand in India reached 802.8 tonnes, up from 761 tonnes in 2023. China’s demand was 985 tonnes.

Value of Gold Demand in India

• The total gold demand value in India surged by 31% in 2024, reaching ₹5.15 lakh crore compared to ₹3.92 lakh crore in 2023, according to a World Gold Council (WGC) report.

Cultural and Financial Importance of Gold

• Gold holds a crucial cultural role in India, often passed down through generations. 
• It is commonly used as a financial asset during times of need, such as medical expenses or college fees, with individuals pledging gold jewelry to secure loans.

Gold Loans: A Popular Financing Option

• Economic slowdowns and uncertainties, such as trade wars and inflation, have driven an increase in gold loans as a stable financial solution. 
• The growth of digital platforms, apps, and fintech solutions has made gold loans more accessible, even in remote areas, further boosting their popularity.

Gold Prices Surge FAQs

Q1. Why did gold prices cross ₹1 lakh per 10 grams?

Ans. Gold prices surged due to global market volatility and uncertainty over US monetary policy under Trump.

Q2. What is driving the gold price rally?

Ans. The rally is fueled by a weak US dollar, geopolitical risks, and concerns over inflation and US economic policy.

Q3. How significant is the Indian gold market?

Ans. India is the second-largest gold market globally, with a demand of 802.8 tonnes in 2024, following China.

Q4. How do gold loans work in India?

Ans. Gold loans have become popular due to economic uncertainties and are accessible through fintech platforms in remote areas.

Q5. Why is gold considered a safe haven asset?

Ans. Gold is a stable asset during financial uncertainty, geopolitical risks, and inflation, driving its demand globally.

Source: IE | BS