R. Suryamurthy
Gold has entered uncharted territory, shattering previous global and India records. This surge, pushing prices past ₹1 lakh per 10 grams in the domestic market, is not merely a market fluctuation but a complex interplay of international economic anxieties and deeply rooted Indian cultural dynamics.
The initial spark for gold’s dramatic ascent can be traced back to growing unease surrounding the stability of the US financial landscape. The prospect of President Trump potentially ousting Federal Reserve Chair Jerome Powell has rattled investor confidence, triggering a classic flight to safety. Gold, traditionally viewed as a store of value during turbulent times, has become the primary beneficiary of this capital outflow from US stocks, bonds, and the dollar.
President Trump’s repeated calls for immediate interest rate cuts and his warnings of a looming US economic slowdown have further fueled this uncertainty. His public criticism of Powell’s cautious approach to monetary policy has injected an element of unpredictability into the market, making the perceived stability of gold increasingly attractive. This situation highlights the sensitivity of global markets to political and policy-related risks, with gold acting as a barometer of this anxiety.
While global jitters have provided the initial momentum, the unprecedented gold prices in India are significantly amplified by domestic factors. The approaching Akshaya Tritiya festival, widely regarded as the most auspicious day for gold purchases, invariably triggers a surge in demand. This year, this seasonal uptick coincides with the ongoing wedding season, where gold plays an indispensable role in rituals and gifting. This confluence of cultural and seasonal demand creates a powerful upward pressure on prices, potentially overriding typical price elasticity.
The psychological impact of gold reaching the ₹1 lakh milestone is significant, particularly for India’s middle class and the traditionally large gold-saving base among housewives. While this price point may necessitate greater financial effort for new investments, the cultural imperative to buy gold during auspicious occasions like Akshaya Tritiya often overrides immediate cost concerns.
The data reveals a staggering increase in gold prices. The ₹1,800 jump in a single day in the national capital to breach the ₹1 lakh mark underscores the intensity of the buying frenzy. The All India Sarafa Association’s figures, showing 99.9 per cent purity gold hitting ₹1,01,600 per 10 grams, and 99.5 per cent purity reaching ₹1,02,100, paint a clear picture of a market in rapid ascent. The nearly 29 per cent increase in gold prices since December 2024 demonstrates a sustained and significant upward trend.
Beyond the US-centric concerns, broader global economic uncertainties are also contributing to gold’s allure. Weak US economic data, new chip export restrictions on China, and concerns about overall global growth are creating a risk-averse environment. The ECB’s recent rate cuts, driven by growth worries, further highlight the fragility of the global economic outlook. In this context, gold’s traditional role as a hedge against economic downturns and currency devaluation is being reinforced. The dip in the US dollar index below 100 signifies a weakening confidence in US assets, further bolstering the appeal of dollar-denominated gold for international buyers.
Sachin Jain of the World Gold Council aptly describes the current situation as “gold’s era,” emphasising the confluence of record global prices and the enduring cultural significance of gold in India, especially during Akshaya Tritiya. His observation that Indians are expected to continue purchasing gold despite the high prices underscores the deeply ingrained cultural value placed on the precious metal. The reported interest in diverse forms of gold investment suggests a maturing market where consumers are exploring various avenues to hold gold.
Looking ahead, the market remains sensitive to developments surrounding US monetary policy and global trade relations. The anticipated “nervous week” highlights the potential for continued volatility. While the cultural demand in India provides a strong floor for prices, any stabilisation in global economic sentiment or a resolution of political uncertainties could potentially temper gold’s upward trajectory.
While international investors seek the safety of gold amidst political and economic uncertainty in the US and beyond, India’s unique cultural affinity for the metal, particularly during auspicious occasions, is amplifying this global trend. This analysis suggests that while high prices may present challenges for some consumers, the confluence of these powerful factors indicates that gold will likely remain a highly sought-after asset in the near future. Monitoring global economic developments and the actual consumer response during the upcoming Akshaya Tritiya will be crucial in gauging the sustainability of this golden run.