New Delhi: The massive jump in gold prices in the last one and a half years has caught the attention of both investors and common buyers. On May 13, 2025, the price of 10 grams of 24 carat gold reached ₹ 94,017, which shows a stunning increase of about ₹ 31,000 as compared to February 2024. What are the reasons behind this boom? Let’s understand in detail:
- Global Economic Uncertainty:
When political tensions rise around the world or there is an atmosphere of economic instability, investors often look for safe havens. Gold is traditionally considered one such safe investment. In situations such as geopolitical turmoil, trade wars or global pandemics, uncertainty in the stock market and other risky assets increases. At such times, investors invest their money in gold, which increases its demand and results in rising prices.
- Inflation:
Inflation, that is, rising prices, is also a major reason for the increase in gold prices. When the prices of goods and services rise, the purchasing power of the currency decreases. Gold is often seen as a hedge against inflation. Investors believe that the value of gold remains stable or increases over time, even if the value of the currency depreciates. The fear of rising inflation increases the demand for gold, which drives its prices up.
- Demand and Supply:
The price of any commodity depends on its law of demand and supply. The same applies in the case of gold. If the demand for gold increases and its supply remains limited, it is natural for the prices to rise. The demand for gold can be affected by various factors, such as the demand for jewellery during festivals and weddings, industrial use and purchase by investors as a safe investment.
- International Market Prices:
Gold is a global commodity, and changes in its prices in the international market have a direct impact on the Indian market as well. When gold prices increase globally, prices in India also usually increase. Gold prices in the international market are affected by various factors, including global economic conditions, interest rates, and currency exchange rates.
- Rupee vs. Dollar Exchange Rate:
India is a major importer of gold. Gold is traded mainly in US dollars in the international market. When the US dollar strengthens against the Indian rupee, it becomes expensive for India to buy gold, which increases gold prices in the domestic market. Gold imports are expensive when the rupee weakens, which is reflected in retail prices.
