Gold Prices Fluctuate Amid Global Market Trends and Festive Demand
Gold Prices Experience Volatility in India
Mumbai: This week, the prices of gold in India saw a slight increase, influenced by global market trends and heightened demand due to the festive season. Midweek, the cost of 24-carat gold dipped significantly, falling by Rs 91, but it rebounded as the weekend approached.
Despite the temporary decline, gold prices are reflecting the broader implications of trade tariff uncertainties and a weakening dollar, which supports the overall market trend. Analysts predict that gold will trade within a volatile range of Rs 99,000 to Rs 1,01,500.
At the start of the week, the price of 24-carat gold (10 grams) was Rs 1,00,167 on Monday, dropped to Rs 99,017 by Wednesday, and concluded the week at Rs 98,534, as reported by the India Bullion and Jewellers Association (IBJA).
According to Jateen Trivedi from LKP Securities, "Gold prices have been volatile, with the weakening rupee bolstering domestic prices. MCX Gold settled at Rs 1,01,180, gaining Rs 350, while Comex gold fluctuated around $3390, remaining within a tight range of $3380 to $3405. Looking ahead, prices are likely to remain unstable due to uncertainties surrounding Trump's tariff policies, particularly as the India deal seems to be off the table for now. A strengthening rupee could limit gold's potential gains."
A report from Bernstein indicates that India's wealthiest households allocate nearly 60% of their financial assets to physical assets such as real estate and gold.
The United States is facing significant trade and budget deficits, which could jeopardize the dollar's status as a reserve currency. Gold emerges as a viable alternative for attracting reserve flows. Currently, global foreign exchange reserves stand at $12.5 trillion, with India holding 15% of the $23 trillion global gold market. Analysts suggest that even a 5% shift of global reserves towards gold could trigger a substantial price increase.
The Reserve Bank of India (RBI) has projected a 3.1% Consumer Price Index (CPI) inflation rate for FY2025-26, attributing this to consistent rainfall and robust kharif sowing, while food prices remain stable.
The RBI anticipates that unfavorable base effects and demand-side policy impacts may push CPI inflation above 4% by the end of FY26. The rise in gold prices has contributed to an increase in core inflation, which rose to 4.4% in June from 4.1-4.2% during February to May.