Gold Prices Reach Record Highs: Impact on India’s Jewellery Demand

Market Performance

Gold prices have reached unprecedented levels, with spot prices climbing to $3,164 per ounce amid rising global trade tensions. This surge has been fueled by investors seeking refuge in safe-haven assets as geopolitical uncertainties and economic disruptions continue to mount.

Equities have experienced volatility due to these market conditions, prompting a shift in investment strategies towards gold. The precious metal has historically been regarded as a stable store of value during times of financial instability.

Factors Driving the Price Surge

During recent trading sessions, gold prices marked another milestone, establishing a new norm for 2025. The spike followed the implementation of reciprocal tariffs by the United States, further intensifying trade tensions worldwide.

The U.S. administration introduced a 10% baseline tariff on imports, with significantly higher rates applied to countries with trade surpluses. This policy shift has led to retaliatory measures by major economies, heightening fears of a full-scale global trade war.

Macroeconomic uncertainties have reinforced gold’s continued upward trajectory, leading investors to recalibrate their portfolios in favour of the yellow metal.

Historical Performance and Domestic Market Trends

Gold ended the first quarter of 2025 with a 19% increase, marking the most substantial quarterly growth since 1986. Over the past two years, international spot gold prices have surged by 60%, while domestic prices on the Multi Commodity Exchange (MCX) have recorded a 53% gain, rising from ₹59,612 per 10 grams to ₹90,986.

This upward movement has been driven by multiple factors, including the Russia-Ukraine conflict, increased gold accumulation by central banks—particularly in China—and geopolitical uncertainties in the Middle East. Additionally, persistently high interest rates have influenced global investor sentiment towards gold.

Impact on Indian Gold Demand

India, the second-largest consumer of gold globally, has traditionally valued the metal for its cultural and economic significance. The country's gold jewellery market remains a crucial segment of consumer spending, with Indian households holding approximately 24,000 tons of gold, accounting for around 11% of global jewellery reserves.

The recent surge in prices has led to cautious consumer behaviour. While demand has not declined drastically, a wait-and-watch approach has been observed among buyers. A notable dip in footfall at jewellery stores has been recorded, though festive sales, such as those during Padwa, indicate continued, albeit slightly reduced, consumer interest.

Conclusion

The sustained rise in gold prices has introduced new dynamics in the global and domestic markets. While demand in India has shown resilience, purchasing trends suggest consumers adopt a more measured approach. With geopolitical tensions, economic policies, and market volatility continuing to influence prices, the trajectory of gold remains a key area of interest for investors and industry participants alike.