Gold Price in India has increased to a record new high of over Rs.87000 per 10g. In Delhi the price of Gold is Rs.87,170 per 10g of 24K Gold. Similarly, the price of Gold is Rs.86,955 in Mumbai.
This is for the first time that the price of Gold has increased this much in India. Let’s understand what is the reason behind this sudden increase in Gold Rate.
Gold prices have hit a record high due to various reasons. One such reason is the fear of a new trade war between the United States and China after Beijing slapped tariffs on U.S. imports in a response to new U.S. duties on Chinese goods.
U.S. President Donald Trump said that he is in no hurry to speak to Chinese President Xi Jinping to try to defuse the trade tensions between the world’s two largest economies. China imposed targeted tariffs on U.S. imports and put several companies, including Google, on notice for possible sanctions, in a measured response to Trump’s tariffs.
Other reasons behind increase in prices of Gold may be:
1. Fear of Rising Inflation
Experts warn that US tariffs on imports from Canada, Mexico, and China could increase product costs and fuel inflation. Concerns over rising prices are driving investors toward gold.
2. Weak Stock Markets
Sluggish equity markets and foreign investor sell-offs have led many investors to shift funds into gold and silver, boosting demand.
3. Slower US Rate Cuts
The US Federal Reserve is expected to delay interest rate cuts due to inflation concerns. This uncertainty has increased gold’s appeal as a safe investment.
4. Budget 2025 Announcements
Finance Minister Nirmala Sitharaman has announced a reduction in customs duty on jewellery and its parts from 25% to 20%, effective February 2, 2025. Experts believe this move will boost domestic demand, especially in the luxury segment, potentially pushing gold prices higher.
Following the announcement, shares of major jewellery brands like PN Gadgil Jewellers, Senco Gold, Titan, and RBZ Jewellers surged by up to 9% on Saturday, reflecting expectations of increased demand.
Meanwhile, the government is considering discontinuing the Sovereign Gold Bond (SGB) scheme, introduced in Budget 2015-16, due to its high borrowing cost. Although the Union Budget 2025 did not mention SGBs, Sitharaman hinted at their possible discontinuation in a post-Budget interaction.
Economic Affairs Secretary Ajay Seth confirmed the government’s stance, stating that SGBs have become an expensive borrowing option. The scheme, launched in September 2015, allowed investors to buy gold in bond form, earning 2.5% annual interest. The last issuance was in February 2024. Due to this also, demand of Physical Gold may increase.
