Gold Prices Surge Amidst Indo-Pak Tensions: Insights from Former Finance Secretary

Gold Prices on the Rise

Gold prices have seen a significant increase over the past week. The cost of 22-carat gold rose by ₹2,910 per 10 grams, while 24-carat gold saw an increase of ₹3,180 per 10 grams. This spike has been linked to the intensifying Indo-Pak conflict, which has been a major topic in the news recently.

Expert Opinion on Gold Price Drivers

In a recent interview, former Finance Secretary of India and ex-Executive Director at the World Bank, Subhash Chandra Garg, stated that the rise in gold prices is not primarily influenced by geopolitical conflicts. He emphasized that the main factors affecting gold prices are the purchasing activities of central banks, which have increased significantly over the last few years.

Garg elaborated, saying, 'The rise in gold prices is largely due to central bank acquisitions, which have surged recently. This trend is partly a response to the accumulation of foreign exchange reserves by countries like the United States and Russia. Many are questioning the wisdom of holding all reserves in USD, leading to gold being considered a viable alternative. Gold is a liquid asset that can easily be converted into foreign currency.'

Investment Demand Influences Prices

He further noted, 'As prices increase, the demand for investment in gold rises—not for jewelry, but for investment purposes. These two factors combined are what have been propelling gold prices upward.'

Potential for Price Reversal

When asked about the possibility of a reversal in gold prices, Garg indicated that such a change would occur if central banks ceased their gold purchases. He reiterated, 'I don’t believe the ongoing conflict between India and Pakistan significantly impacts gold prices.'