Today, gold price is on the rise in India. Despite seasonal volatility, gold value has increased almost 12% in a year and 783% over the last 20 years. Why is gold price rising in India in 2023?
The Value of Gold in Indian Society
Gold is the ancient means of exchange. This precious metal has been the symbol of wealth for centuries. Unlike the paper money, it has never lost its value. It is no wonder that people across the globe treat it as a wise investment. Moreover, gold is a perfect metal for exquisite jewellery, which is also highly cherished through the ages.
In India, the attitude to gold is special. The country is the second-largest gold jewellery consumer in the world. In 2021, India bought 611 tonnes of gold jewellery, following only China with 673 tonnes, according to the ‘Jewellery Demand and Trade’ report released by the World Gold Council on January 19, 2023.
The largest driver of gold consumption in India is tradition. Golden ornaments are an intrinsic part of religious beliefs, traditional festivals and celebrations in India. Bridal jewellery alone constitutes 50-55% of the gold market share. Weddings and traditional festivals are the two major gold purchase occasions in India.
At the same time, gold is an important financial instrument in India. Indians often use gold as collateral for loans and as a means of savings when global economic conditions become uncertain.
Why Gold Demand Surges in India
Despite global modernization, Indian society remains deeply respectful of its age-old traditions. Over the long term, gold jewellery demand in India is driven by developments in economic growth, income growth and wealth distribution.
At present, India remains a country with a fast-growing economy. India’s GDP growth rate rose to a pace of 7.8% y/y in the April-June quarter of 2023, following the growth of 6.1% y/y in the January-March quarter of 2023, according to data released by India’s National Statistical Office. Goldman Sachs estimates that India can become the world’s second-largest economy by 2075.
Not only the country but also its citizens are statistically getting richer. On average, wealth per adult has grown at an annual rate of 8.7 percent since 2000, reaching $16,500 by the end of 2022. Increasingly, rich Indian families look for gold as a profitable investment.
Even the rapid expansion of innovative technologies and financial inclusion didn’t change the utter belief in gold investments in rural India. The country has a large agricultural sector. People in rural areas have long been denied access to traditional banking services. Although that situation has drastically changed, the appreciation of gold in rural communities has not. Therefore, gold demand in India often changes from season to season and depends on the harvest’s success.
How Gold Price Changes in India
While gold has a stable value, its market price varies. Current gold price depends on supply and demand balance, geopolitical events, speculative trading practices, and government policies. In addition, gold price today depends on taxes that incur at many levels: state taxes, local city/region taxes, and transportation taxes.
All these factors influence the price of raw gold material, e.g. gold bullion. However, when you deal with ornaments or jewellery, sellers also take into account all additional costs connected with jewellery production, storage, or trading when forming the ultimate price.
Besides, gold price in India differs from region to region. Some cities are closer to ports where imported gold arrives, while others are far from the coast. That directly influences the gold logistic costs.
The best way to estimate the fair price of a golden item is to check live gold prices. For example, if you’re looking for gold wedding jewellery, you may consider buying gold in Chennai. The city has one of the highest numbers of gold consumers in the country, being famous for its bridal jewellery collections. You can find out Gold Rate Today in Chennai at this website.
On the other hand, Chennai is a port city and the gold price here would greatly differ from gold prices in mid-country regions. If your city or village is far from the sea, you may check the Gold Rate Today in Hyderabad. This city also boasts one of the most active gold consumers in the region. At the same time, it does not have its own ports and is far from the sea coast. Therefore, the gold price in Hyderabad is reflective of numerous tax and transportation charges.
Finally, gold price depends on the foreign exchange rate, since most of the gold in India comes from abroad. Importing gold involves currency exchange. Mostly, the gold rate takes into account the price of the US dollar.
Why Gold Price is Rising in India Today
If we analyze the gold rate in India for the last year, we can see that, despite all seasonal fluctuations, the prices of gold have jumped significantly. In 2022, the average pure 24K gold price per 10 gram was Rs.52,670 ($633). Over the first six months of 2023, the price was already Rs.61,080 ($734).
At the moment of writing, the gold price is actually at its yearly low, reflecting the weak demand at the spot market and a strong US dollar. Nevertheless, it still shows a significant year-on-year growth (12%).
The gold rate growth seen during 2022 and early 2023 was largely attributed to the geopolitical uncertainty caused by the Russia-Ukraine war. All the traditional ‘safe haven’ assets surged in a steep rally. As the war news started fading out on a global agenda, central banks started raising rates to tame inflation. That influenced the forex market and, accordingly, the price of gold.
Nevertheless, the end of the Russia-Ukraine war is nowhere in sight. That is why, we may not speak of the return to global stability just yet. That means the gold rate will remain high in the near future.
Moreover, historic gold rates have never shown long-term declining trends. No matter the global events and market trends, gold value in INR has increased by 783% over the last 20 years.
Bottom Line
The combination of national prosperity and global instability creates an increasing demand for gold. India is one of the fastest-growing economies in the world. Its citizens need to store their wealth in a meaningful way. Gold is a well-performing investment instrument, which brings high long-term returns. It is the best ‘safe haven’ asset amid global turbulence and a hedge against rising inflation. Besides, the demand for gold in India is rooted deeply in national traditions, in particular, the rituals and ceremonies of the auspicious wedding season. They remain popular among the younger generations, as well as bridal gold jewellery that constitutes half of the Indian gold market sales.
