The Glitter and the Strain: India’s Tryst with Rising Gold Prices

Siddharth Roy

(siddharth001.roy@gmail.com)

Gold has always held a sacred place in Indian hearts. From the tiny gold chain given to a newborn to the intricate ornaments that light up a bride’s face, the yellow metal is more than a commodity here—it is emotion, heritage, and security rolled into one. Yet, in recent months, the very metal that symbolizes prosperity has begun to strain the pockets of millions. Gold prices have been on a relentless rise, crossing record highs across global and domestic markets. For a country that consumes around 700–800 tonnes of gold every year, this surge carries far-reaching consequences—economic, social, and cultural.

The current rally in gold is not an isolated Indian phenomenon. It is the outcome of a complex mix of global uncertainty, central bank behaviour, currency movements, and local sentiment. Across the world, investors have been running towards gold as a safe haven. Geopolitical tensions in West Asia and Eastern Europe, rising oil prices, and fears of economic slowdown in the US and China have created a climate of anxiety. When the future feels uncertain, gold becomes the default refuge. Adding to this is the expectation that major central banks, including the US Federal Reserve, will soon begin cutting interest rates. Lower interest rates make non-yielding assets like gold more attractive, pushing prices even higher.

Central banks themselves have become major buyers of gold in recent years. Nations from China to Turkey are diversifying their reserves away from the US dollar, and India’s own Reserve Bank has added steadily to its gold holdings. When institutions buy, prices rise. Meanwhile, the US dollar’s recent weakness has made gold more appealing to investors across the world, further fuelling demand.

For India, the global story has an extra layer: the rupee and our deep-rooted cultural attachment. Since India imports nearly all the gold it consumes, a weaker rupee automatically makes gold costlier in domestic terms, even if international prices remain stable. The rupee has hovered near record lows this year, magnifying the price rise for Indian buyers. Add import duties and taxes, and the price of a sovereign of gold now feels heavier than ever before.

This has very real consequences for Indian households. For those who already hold gold, the rise in prices can feel like a silent blessing. Their savings, stored safely in bank lockers or family trunks, are suddenly worth much more. But for the millions preparing for weddings or festivals, the surge is a financial blow. Families planning to buy ornaments for Diwali or Dhanteras are either settling for lighter designs, lower-karat jewellery, or postponing purchases altogether. What was once a joyous ritual is now a calculated expense.

The jewellery industry, a massive employer and contributor to India’s GDP, is also feeling the pressure. Jewellers report lower footfalls, smaller-ticket sales, and growing demand for gold coins instead of elaborate ornaments. Artisans in traditional hubs such as Surat and Coimbatore, many of whom work on thin margins, are struggling to adjust.

Beyond households and businesses, the rise in gold prices has macroeconomic implications. Since gold is imported, higher prices mean a larger import bill, which widens India’s trade deficit and puts pressure on the current account. Every extra billion dollars spent on gold imports drains foreign exchange reserves that could otherwise fund productive investment. It also indirectly weakens the rupee, feeding a self-reinforcing cycle.

Inflation is another hidden impact. Although gold is not a direct component of consumer inflation indices, its price affects sentiment and household savings behaviour. When people pour money into gold, less flows into productive financial instruments like mutual funds or government bonds. Economists have long warned that India’s love affair with gold often diverts capital away from the formal economy.

The government, for its part, is not unaware of the challenge. In early 2025, the Centre cut the import duty on gold to around 6%, aiming to narrow the gap between international and domestic prices and discourage smuggling. The move appears to be paying off—official gold imports have risen while unofficial inflows have slowed. However, the government is walking a tightrope: cutting duties too much could worsen the trade deficit, while keeping them high revives smuggling.

Schemes like the Gold Monetisation Scheme and Sovereign Gold Bonds were launched to mobilise the thousands of tonnes of idle gold sitting in Indian homes and temples. The idea was simple—turn this dormant wealth into productive capital. But despite the promise, the uptake has been lukewarm. Many Indians still prefer to see and touch their gold rather than hold it in a digital or financial form. To change that mindset, the government must combine financial incentives with trust-building—simplify redemption, guarantee purity, and enhance awareness.

There is also scope to encourage gold recycling. India imports massive quantities of new gold every year, yet large amounts of old jewellery remain unused. Strengthening gold-recycling infrastructure could reduce dependence on imports and create new domestic business opportunities. Simultaneously, ensuring that every piece of gold sold is hallmarked and traceable would improve transparency and consumer confidence.

In the longer term, stabilising the rupee and maintaining inflation control will be key to moderating gold prices in rupee terms. A strong, credible macroeconomic environment reduces the incentive for households to hoard gold as a hedge against uncertainty. Likewise, deepening India’s financial markets and encouraging broader investment habits, from equity SIPs to digital gold, can gradually shift savings away from physical assets.

But let’s be realistic: gold is not just an investment in India. It is emotion, legacy, and insurance rolled into one. It will never disappear from our cultural or financial landscape, and it need not. The challenge is to ensure that our collective affection for gold does not undermine our economic stability. If we can channel even a fraction of our gold demand into formal and productive channels, India’s financial resilience would shine as brightly as the metal itself.

The current surge in gold prices is a reminder that global markets and local sentiments are deeply intertwined. The world turns to gold when it is anxious; India turns to gold when it celebrates. Somewhere between anxiety and celebration lies the path we must tread, one of balance, awareness, and prudence. Gold will continue to gleam in our households and temples, but its glow should not blind us to the broader economic picture.

In the end, perhaps the real lesson of this golden rally is this: wealth is not measured by the weight of the ornaments we wear, but by the strength of the economy we build. Let India continue to love its gold, but wisely, sustainably, and with both eyes open to the glitter and the strain.