Gold Prices Soar To Record High In India: Key Factors Driving The Surge In 2024

Gold prices in India have soared to an all-time high, reaching ₹76,000 per 10 grams on Wednesday. Internationally, spot gold prices also surged to $2,662 (₹222,752 per ounce), nearing its previous record of $2,670.43.

This surge is attributed to a combination of global economic factors and geopolitical tensions.

What's Behind the Gold Price Spike?

Gold prices in India have been on the rise, with 24-carat gold hitting ₹75,280 per 10 grams and 22-carat gold reaching ₹69,007. In dollar terms, gold has gained 30% this year, with a 19% rise in India. A record hike in gold imports, totaling 140 tonnes worth $10.1 billion in August, further underscores the increasing demand, particularly ahead of the festive season.

Additionally, gold exchange-traded funds (ETFs) in India have seen significant inflows, with $238 million recorded in August alone, compared to the average monthly inflow of ₹8 billion during the first half of 2024.

The Reserve Bank of India (RBI) has also bolstered its gold reserves, purchasing 10.3 tonnes in the six weeks leading up to September 6, bringing its total purchases to 50 tonnes this year. This has made the RBI one of the top gold buyers globally in 2024.

Global Gold Trends

Internationally, gold prices continue to climb, with spot gold trading at $2,660.75 per ounce on September 26. U.S. gold futures also hit $2,684.70. So far this year, gold has risen by more than 28%, driven by various factors.

Why Are Gold Prices Rising?

Gold has long been considered a "safe haven" for investors during times of economic uncertainty. The ongoing conflict between Israel and Hezbollah has heightened concerns of a broader war in West Asia, driving demand for gold.

A weaker U.S. dollar has also made gold more attractive. As the dollar's value falls, gold becomes cheaper for international buyers, further increasing demand. The U.S. dollar is currently near a 14-month low.

The U.S. Federal Reserve's recent interest rate cut of 50 basis points has also contributed to the surge in gold prices. Expectations of another rate cut in November have made gold a more appealing investment. Lower interest rates reduce the opportunity cost of holding gold, leading to increased demand.

Additionally, central banks worldwide have begun reducing interest rates as inflation eases and economic uncertainties persist. China's central bank, for example, has cut interest rates to stimulate its economy, further boosting gold demand.

The Festive Factor in India

In India, the rise in gold prices coincides with the onset of the festive season, including Durga Puja, Navratri, and Diwali. Although demand may soften slightly during the ongoing Shraadh period, it is expected to pick up during the major festivals.

Colin Shah, Managing Director of Kama Jewellery, noted that while demand might dip temporarily, the overall sentiment is positive, with momentum likely to build through Navratri and Dhanteras.

Outlook

Analysts predict that gold prices will remain elevated in the coming months, driven by global economic factors, geopolitical tensions, and increased demand ahead of the festive season. Market watchers expect continued inflows into gold ETFs, further supporting the upward trend in gold prices.