Gold Surges ₹4,000 To Record ₹1,37,600 High

On Monday, gold prices in India increased by ₹1,37,600 per 10 gms to form a surge of ₹4000 for 99.9% purity as a result of strong global factors.

On Friday the market closed at ₹1,33,600/10 gm, and over the weekend, it saw a tremendous increase due to the rise in safe-haven demand caused by global instability and slow economic growth around the world.

With increasing demand from Central Banks and institutions all over the world, gold has become a mainstay of protection against market volatility. So, the question is, what fuels this unprecedented price increase, and how will it affect Indian investors and the Indian economy?

How Did Gold Prices Build Momentum Earlier?

As interest rates continue to decline, the price of international spot gold has rallied. Rising at 1% to over ₹3,95,115 per ounce on Monday, the yellow metal reached new records the following week as speculators anticipate that the next set of economic results will reinforce low-interest-rate policies.

As such, domestic price trends in the local gold market were very closely aligned with international markets. However, the local prices were further impacted by the rupee-dollar exchange rate and additional taxes imposed on gold imports.

The rise in prices has mirrored the rise in international prices of gold and is expected to continue through next week as market participants focus on the US' macroeconomic releases, which are expected to maintain elevated price volatility for gold.

Domestic purchases of gold decreased during the month of November, following substantial increases in October. However, this has contributed to lower total import expenses while also increasing traceability of gold transactions through regulated channels that are controlled by the Reserve Bank of India through appointed agencies and banks.

Continuing to be the largest source of gold imports, Switzerland represents approximately 40% of the total gold imported into India. Domestic prices for gold in India continue to remain correlated with the respective prices of gold in international markets and will not fluctuate significantly due to shortages.

RBI Gold Reserves And Safe-Haven Strength

The Reserve Bank of India has increased its gold holdings to 879.58 metric tonnes on March 31, 2025, from 822.10 metric tonnes one year earlier, thereby supporting an increased confidence in the Indian rupee and external economic stability for India and other emerging economies.

In addition to serving as part of the Reserve Bank's gold reserves, gold also plays a key role in the expansion of household wealth through the increase in the notional value of existing gold holdings.

For potential buyers, gold provides an alternative to holding cash and/or cash equivalents, with many looking for an eventual appreciation of this investment.

States are known to have different socio-cultural attitudes towards the consumption and storage of gold. Therefore, the rally in gold could be more beneficial to those states that have large quantities of gold stored away versus states where consumers have little interest or faith in gold as a store of wealth or investment, especially given the current high price point for gold.

Silver Stability Amid Gold's Rally

Amidst weakness in the rupee and a rate cut by the US Federal Reserve, silver prices in the national capital, on Thursday, rose by a record high of ₹1,94,400/kg by ₹2,400, following the directions of firm global prices.

Silver does not appear to be impacted by gold's performance. Rather, it reflects strength due to diversified uses, such as industrial use. Since the use of silver in the production of goods offsets the volatility associated with gold, silver has significant portfolio diversification value.

Gold is currently priced at ₹137,600 per 10 grams. As the market continues to change, the crucial question for investors is: How long can the safe-haven momentum for gold extend amidst dynamic and changing global risks as well as changes in domestic sourcing dynamics?

Sources:

Economic Times
MSN
Financial Express