If you walked into a jeweller’s recently, you may have done a double-take at the price tag. Gold in India has climbed to record highs. Five forces are driving the rally.
1. Central banks are stockpiling gold
The most underappreciated driver is the buying spree by central banks globally, including the RBI. Emerging-market central banks are reducing reliance on the US dollar as a reserve currency.
2. Geopolitical uncertainty
Gold is the original “safe-haven” asset. The Ukraine war, Israel-Hamas conflict, US-China tensions, and election-year volatility have kept geopolitical risk elevated.
3. The US Federal Reserve’s rate cycle
Gold typically moves inversely to real US interest rates. When the Fed cuts rates, the dollar weakens, US Treasury yields fall, and gold becomes relatively more attractive.
4. The rupee factor
For Indian buyers, when the rupee weakens against the dollar, the imported price of gold rises in rupee terms even if the dollar price stays flat.
5. Indian wedding and festival demand
India is the world’s second-largest gold consumer. India’s annual gold demand of 700-800 tonnes provides consistent baseline buying that supports the global market.
What this means for households
For investors, gold’s role in a diversified portfolio is unchanged: 5-10% allocation. Indian investors have three good options:
Sovereign Gold Bonds (SGBs) offer an additional 2.5% annual interest, tax-free on maturity.
Gold ETFs offer real-time liquidity at low expense ratios.
Digital gold allows fractional investment from as low as ₹1.
Physical jewellery is the worst investment route — making charges of 10-25% and GST mean you start at a 15-30% loss.
Klik News Markets