Commodities & Currency

Three Factors That Influence the Price of Gold in India

Gold price in India

In Indian culture, one of the most revered and sought-after metals has, and remains, gold. Whether it is a festival, a wedding, or even a birth, no event in India is said to be complete without the use of gold. Given its ever-increasing value, most Indians also tend to view gold as a long-term investment, one that can help provide stability in times of financial duress. 

Given its widespread popularity all across India, it is worth assessing what factors specifically contribute to the price of gold in the country. Over the course of this article, we shall shed light on the three main factors that contribute to the gold price in India.

1. Gold and its Long History in Indian Culture

From time immemorial, gold has held a pivotal place in Indian culture and traditions. Often embedded in the culture of the land itself, gold in India has always been viewed as an integral part of the country’s culture, often handed down from generation to generation. Gold in India is viewed as an asset, one that acts as a measure of safety during tough times. While the value of the currency may fluctuate from time to time, the gold rate in Mumbai has always been steadier, which is why Indians tend to revere the metal for its intrinsic value of safekeeping.

2. Gifting of Gold During Weddings

In India, weddings are viewed as a sacred event – the union of not only two souls, but of families and cultures as well. As has been the tradition for centuries, when a wedding takes place, the bride is often showered with gold ornaments – also referred to as ‘stridhan’. These gold ornaments remain the sole property of the bride and are meant to offer her financial stability during times of distress, or in the unfortunate event of the demise of her husband. On average, gold ornaments tend to account for as much as 30% to 50% of combined marriage expenses in India. Rather than offering cash, gold is a preferred gifting option in India at the time of marriage, given its stable nature and value.

3. Augmented Demand for Gold Jewellery

We are all well aware of the fact that Indians absolutely love their jewellery. Whether it is a birthday, a wedding, or a festival, gold jewellery is always a key component of every such event. During every festival season in India, the price of gold sees an upward spiral, owing to the vastly augmented consumer demand for the same. With there being a higher demand for the precious metal as opposed to the supply, prices tend to rise during the festive season. The possession of gold is also viewed as a status symbol in India, as a showcase of one’s wealth and affluence. In addition to the demand for gold for the sake of jewellery, the precious metal is also used, in small quantities, in the production of electronic devices such as computers, televisions, and even GPS sets, to name a few.

Other Factors That Also Contribute to Determining the Price of Gold in India

In addition to the factors listed above, gold price in India is also determined on the basis of the following factors:

  • Inflation: Gold acts as a great store of value – which is why it serves as the ideal investment to combat inflation. While the value of the currency may move up and down, based on market determinants, the value of gold remains more or less stable all throughout. Thus, when inflation in any given economy rises beyond the permissible limit, the value of gold also goes up significantly, owing to a larger demand for the same from the general population.
  • Geopolitical Factors: When a country gets hit by geopolitical instability, people tend to naturally opt to purchase larger quantities of gold – as a hedge against the instability. Conversely, when a country enjoys a prosperous economic period, the value of gold tends to fall, owing to lesser demand for the same from the public. For example, if there’s geopolitical instability in Mumbai, then the gold rate in Mumbai will rise. 
  • Interest Rates: The gold rate in Mumbai is also greatly determined by the prevalent rates of interest in the country. Thus, when the rate of interest rises, the value of gold drops, and vice-versa. This is owing to the fact that when the prevalent rates of interest are high, the general population prefers to take advantage of the same, and earn a good margin through other lucrative investments, rather than relying on gold. 

Of the many precious metals that our planet possesses, gold is the most sought after, and has been so, for millennia. In the face of every cycle of economic highs and lows, gold has remained a steady benchmark, and has never lost its value. In addition to other investments, you must make to ensure financial stability, investing in gold as a means of diversifying your portfolio is essential as well.

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I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as,, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.

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