Why Gold Prices Are Rising In India: Explained With Global & Local Factors

As of December 30, 2025, gold prices in India have touched historic levels, with 24-carat gold trading around ₹1,36,000–₹1,38,000 per 10 grams. In just one year, gold has risen by nearly 70–80%, surprising many buyers and investors.

This sharp rise did not happen overnight. It is the result of global fear, government decisions, interest rate expectations, and strong demand in India. Here is a simple explanation of what is really happening.

1. Global Tensions and Fear (The Biggest Reason)

Gold performs best when people feel unsafe about the future.

At present, global tension is high:

Wars and tensions in Ukraine, the Middle East, US–Venezuela relations, China–Taiwan stand-off, African unrest, Red Sea shipping attacks, and rising trade wars are making the world feel unstable.
Fear of fresh trade wars due to strict US tariffs and protectionist policies.

What this means:
When people fear war, trade trouble, or economic slowdown, they avoid risky investments like shares. Gold feels reliable and safe. More fear leads to more gold buying—and prices rise.

2. Central Banks Are Buying Gold in Large Quantities

This time, gold buying is not limited to ordinary investors. Governments are also buying heavily.

Central banks in countries such as India, China, and Russia are purchasing gold at record levels.

Why are they doing this?

To reduce dependence on the US dollar
To protect national wealth during uncertain global conditions
Because gold is not controlled by any one country or government

Simple impact:
When governments keep buying gold, prices get strong support. Even if markets fall, gold does not drop easily.

3. US Federal Reserve and Interest Rate Expectations

Gold and interest rates usually move in opposite directions.

When banks give high interest, people keep money in savings and fixed deposits.
When banks give low interest, keeping money in banks feels less useful.

Markets currently expect the US Federal Reserve to reduce interest rates further in 2026.

It is not just the US Federal Reserve. Interest rate decisions by many central banks affect gold prices.

However, the US Federal Reserve has the biggest impact.

Why the US Federal Reserve matters most

Gold is priced in US dollars
US interest rates influence global money flows
Decisions by the Fed affect bonds, currencies, and markets worldwide

When the Fed signals lower rates, gold prices usually rise globally.

Other central banks also play a role

European Central Bank (Europe)
Bank of England (UK)
Bank of Japan
People’s Bank of China
Reserve Bank of India (RBI)

If many central banks cut rates together, gold becomes even more attractive.

In simple words

Lower global interest rates = weaker returns on savings = higher demand for gold
The US Fed leads the trend, others often follow.

Why this supports gold:

Gold does not earn interest, but it also does not lose value easily.
When bank deposits and bonds give lower returns, gold looks more attractive

In simple words:
If money in the bank grows slowly, people prefer to store value in gold instead.

India-Specific Reasons Making Gold Even Costlier

4. Weak Rupee Effect

India buys most of its gold from other countries and pays for it in US dollars. Right now, 1 US dollar is worth about ₹89.5–₹90 in India.

Because gold is priced in dollars globally, every increase in the dollar’s value makes gold cost more rupees in India.

Even if the global gold price does not change, a weaker rupee still raises the price Indian buyers pay.

Why this matters:

India imports most gold, so currency changes hit prices fast.
A falling rupee makes gold more expensive before global rates even rise.

Example:
If gold costs $2,000 per ounce:

At ₹89 per dollar → ₹1,78,000
At ₹90 per dollar → ₹1,80,000

Same gold, higher Indian price.

In simple words:
When the rupee weakens against the dollar, gold becomes costlier for Indian buyers — even if international gold prices stay the same.

5. Wedding and Festive Demand

December is one of the busiest wedding months in India.

Despite record prices:

Weddings continue
Jewellery purchases continue
Cultural attachment to gold remains strong

Result:
High physical demand keeps gold prices under pressure in the domestic market.

6. Shift from Stocks to Gold

In 2025, returns clearly favoured gold:

Gold rose by over 70%
Stock markets like the Nifty 50 returned around 10%

What investors are doing:

Moving money from shares to Gold ETFs
Buying digital gold through apps
Treating gold as a safer option

When lakhs of small investors move together, prices rise quickly.

Analysis: What Does This Mean for India?

For Common People

For ordinary buyers, rising gold prices mean higher costs for jewellery and savings. Wedding expenses increase, and small investors may hesitate to buy at record levels.

For Investors

From an investment perspective, rising gold prices show growing uncertainty in the global economy. Gold is acting as a hedge against inflation, currency weakness, and financial instability. This suggests that economic confidence remains fragile.

Is This a Bubble?

Experts believe the current rise is driven more by fundamentals than speculation. Central bank buying, global risks, and currency pressures indicate that gold’s strength is not temporary hype.

Will Gold Prices Fall?

Yes, short-term corrections are possible due to profit booking or improvement in global conditions. However, unless global stability returns and interest rates rise sharply, gold prices are likely to remain elevated.

The Bottom Line

Gold prices are rising because the world is uncertain, currencies are under pressure, and both investors and governments are choosing safety over risk. For India, this means expensive gold in the short term—but also a reminder of gold’s role as a trusted store of value in difficult times.

Also read: https://theeasterntimes.com/gold-price-today-india-december-16-2025/

https://theeasterntimes.com/gold-price-today-india-december-16-2025/