Gold prices in India cross Rs 1 lakh per 10 grams amid global uncertainty

Gold prices in India have soared to an unprecedented high, breaching the Rs 1 lakh mark per 10 grams for the first time. This sharp uptick reflects a complex interplay of global economic uncertainties, escalating geopolitical tensions and shifts in United States monetary policy.

On Tuesday, the price of 24-carat gold (999 fineness) in Mumbai reached Rs 1,00,000 per 10 grams, while 22-carat gold stood at Rs 91,600. The domestic rally aligns with global trends, with international gold prices surging past USD 3,400 an ounce, hitting USD 3,486.85 in New York.

India, the world’s second-largest consumer of gold after China, witnessed a rise in gold demand to 802.8 tonnes in 2024, up from 761 tonnes in the previous year. The total value of this demand surged by 31 per cent to Rs 5.15 lakh crore, underscoring gold’s enduring role in the country’s economic and cultural fabric.

One of the key drivers behind this record-breaking surge is political and economic uncertainty in the United States. President Donald Trump’s announcement of plans to restructure the Federal Reserve — paired with his criticism of chair Jerome Powell for not cutting interest rates — has rattled financial markets and eroded investor confidence.

These developments contributed to a significant weakening of the US dollar, which has fallen to its lowest level since 2022. The US dollar index dropped to 97.92, a three-year low, making gold relatively cheaper for holders of other currencies, thereby fuelling global demand.

Geopolitical unrest has further compounded the momentum. Prolonged conflicts such as the Russia–Ukraine war and rising trade tensions between the US and China have prompted investors to seek the safety of gold.

Persistent inflation fears have added to this flight to safety, reaffirming gold’s traditional status as a hedge against economic instability. Central banks — particularly in China and India — have bolstered their gold reserves significantly, while institutional investors have increased their holdings amid growing fears of a US debt crisis and a broader global economic slowdown.

In India, gold holds not just ornamental value but is deeply interwoven into social customs and financial practices. Amidst the current economic slowdown, gold loans — where individuals pledge gold jewellery for short-term financial needs — have become increasingly popular.

The rise of digital lending platforms and fintech solutions has made it easier for consumers to access gold-backed credit, strengthening the metal’s status as a financial fallback in times of distress.

Looking forward, analysts suggest gold prices could continue their upward trajectory if global tensions persist, and US monetary policy remains unsettled. Some projections even foresee gold surpassing USD 3,500 per ounce in the near future.

However, any signs of stabilisation in interest rates or easing geopolitical pressures could temper the rally.

For investors, gold remains an attractive shield against inflation and currency fluctuations, although they must remain cautious of potential price swings.

For consumers, the steep rise may dampen jewellery purchases, yet the trend of leveraging gold as collateral for loans is expected to gain further traction.