Gold Price Quadruples in India as Demand Soars and Affordability Plummets
Gold has emerged as a prominent financial asset, with exchange-traded funds (ETFs) and sovereign instruments transforming gold purchases into tradeable, liquid positions. This shift has occurred alongside a steady global mine production growth, matching demand around 5,000 tonnes. Notably, the price of gold has quadrupled in the last decade in India, reaching Rs 1,10,000 per 10 grams.
The commoditisation of gold has led to price discovery moving from local markets to global flows, influencing jewellery pricing for life events. Central banks, including the Reserve Bank of India (RBI), have been purchasing gold, reducing the available pool and driving up prices. This trend has been accompanied by a surge in gold ETF assets under management in India, reaching Rs 60,000-65,000 crore, equivalent to 40-50 tonnes of gold.
The depreciation of the Indian rupee against the US dollar has also contributed to the increase in gold prices. Despite these factors, domestic demand for gold remains significant, with annual demand estimated at 700-800 tonnes, accounting for 70-75% of domestic consumption. However, the rising gold price has made it unaffordable for many middle and lower-middle-class households to buy gold for weddings, festivals, and other social events.
The transformation of gold into a liquid financial asset, coupled with central bank purchases and currency depreciation, has driven gold prices to record highs in India. While demand remains robust, the affordability challenge for many households is growing. As gold continues to play a crucial role in Indian culture and investments, policymakers and industry stakeholders must address these affordability concerns.
