Why in News?

Gold prices have crossed ₹1 lakh per 10 grams for the first time, driven by a surge in international markets after US President Donald Trump announced plans to overhaul the Federal Reserve.

In Mumbai, 24-karat gold was priced at ₹1,01,350 and 22-karat at ₹92,900 per 10 grams. The rise reflects gold's status as a safe haven amid global market volatility, concerns over Trump's tariff plans, and potential inflation due to Fed changes.

What’s in Today’s Article?

• Reasons Behind Gold Prices Crossing ₹1 Lakh-Mark
• Indian Gold Market: Size and Significance

Reasons Behind Gold Prices Crossing ₹1 Lakh-Mark

• Surge in Global Gold Prices
  • Gold prices have surged globally, crossing $3,400 per ounce, contributing to a significant rise in India.
  • This surge is attributed to a weakening US dollar, making gold more affordable for foreign currency holders.
    • The US dollar continued to weaken, falling to its lowest level since 2022. As tensions between Trump and the Fed mount, global investors are retreating from US assets.
    • A weaker dollar boosts gold demand, as it becomes cheaper for international investors.
• Uncertainty Surrounding US Monetary Policy
• The rally is fueled by renewed uncertainty over US monetary policy, following President Trump’s plans to overhaul the Federal Reserve.
  • Concerns about the Fed's independence have created uncertainty in financial markets.
• His criticism of Fed Chairman Jerome Powell and calls for lower interest rates have intensified market concerns.
• Geopolitical Tensions and Inflation Concerns
  • Escalating geopolitical risks, such as tensions over Russia-Ukraine, and persistent inflation fears are also driving gold's safe-haven appeal.
  • The US Federal Reserve has warned that tariffs could disrupt its economic objectives, further supporting gold demand.
• Central Bank and Institutional Demand
• The gold rally is further supported by increased buying from China, global central banks, and institutional investors, as well as growing concerns over the US economic outlook and debt crisis.
• Analysts Insight
  • Analysts highlight that escalating tariff tensions, the uncertain US economic outlook, and continued buying activity from major global players are adding momentum to gold’s upward trajectory.

Indian Gold Market: Size and Significance

• India is the second-largest gold market in the world, following China.
• In 2024, gold demand in India reached 802.8 tonnes, up from 761 tonnes in 2023. China’s demand was 985 tonnes.
• Value of Gold Demand in India
  • The total gold demand value in India surged by 31% in 2024, reaching ₹5.15 lakh crore compared to ₹3.92 lakh crore in 2023, according to a World Gold Council (WGC) report.
• Cultural and Financial Importance of Gold
  • Gold holds a crucial cultural role in India, often passed down through generations.
  • It is commonly used as a financial asset during times of need, such as medical expenses or college fees, with individuals pledging gold jewelery to secure loans.
• Gold Loans: A Popular Financing Option
  • Economic slowdowns and uncertainties, such as trade wars and inflation, have driven an increase in gold loans as a stable financial solution.
  • The growth of digital platforms, apps, and fintech solutions has made gold loans more accessible, even in remote areas, further boosting their popularity.