Gold in our country is a symbol of culture, tradition, prosperity, status, and fortune. It is used in festivals and on special occasions like weddings. You can see gold jewelry adorn women in our marriages. Gods and goddesses are decorated with ornaments of gold in India. It is used to give presents. It is seen as a status symbol, and parents pass it down as wealth to their children. Gold coins are very popular, and they come with different weights and varying costs. Gold is also a valuable asset, and it can help you in times of crisis as it never completely loses its value. There are more contemporary forms of investing in gold, such as Exchange Traded Funds (ETFs), gold mutual funds and derivatives. Owing to its innumerable and irreplaceable utility, it is in high demand in India. The demand for gold in India constitutes 25% of the overall demand for gold globally. Every now and then, its price keeps changing.

Read on to find out the top 5 factors that affect the gold rate in India. 

1: Inflation

The value of gold is quite steady as compared to currency, and that is why it is a very safe investment option. It is used to safeguard against inflation. Its prices rise when there is inflation since there is a high demand for it during such times. The inflation in India would affect the prices of gold in Chennai, Mumbai, Delhi, and all over India. This holds true for international gold prices as well. 

2: Demand Versus Supply Mismatch

There is high demand for gold in India during the festival seasons. Gold is used in presentations, jewelry, coins, bars, and as a wealth symbol in India. During the wedding season, the prices rise considerably. Also, gold is used in meager quantities to manufacture electronic components. The industrial demand for gold amounts to 12% of the overall demand for gold in India. The medical industry also needs this yellow metal. Gold is a very safe and preferred investment option in India and can be used to hedge inflation. It is used as collateral for availing loans, and gold loan is one of the most sought-after kinds of loan in India. It is easily sanctioned and the application process is quite simple. Thus, the demand for gold in India is excessive. It is not only used in jewelry but also in various other spheres. Hence, time and again, India has to import gold from other countries to meet the ever-rising demand. So, prices for gold rise significantly when there is a discrepancy between demand and supply. 

3: Gold and Interest Rates

There is a negative correlation between the prices of gold and interest rates in India. That is when the interest rates in India are on a high, people sell gold to get liquid cash. So, there is a high amount of gold supply, which leads to a decrease in the price of gold.  On the other hand, when the interest rates are low, people have a lot of cash in hand, and there is a deficit in the supply of gold. Hence, the price of gold is high. The price of gold is generally an indicator of a country’s interest rates.

4: Global Trends in the Prices of Gold

India imports gold in huge quantities. Thus when there are changes in global prices, the import prices also vary resulting in changes in the price of gold inside the country.  The value of the rupee against the US dollar is an important factor that affects the gold rate in India. If the value of the rupee weakens against the US dollar, then gold prices will increase.  The values of currencies fall during times of political crisis, recession, pandemics, etc. During these times, investors look for other options to store value, and gold is often seen as an excellent choice. Thus gold prices obviously rise during such times.

5: Gold Reserves Held by the Government 

The government of India holds gold reserves, and it purchases or sells gold through the Reserve Bank of India. Thus when the central bank of India buys more gold, the price of gold goes up. 


The price of gold is impacted by many factors across the globe and in India. The top 5 factors as listed above that affect the rate of gold may be useful to you in understanding why gold prices rise and fall. 

FAQS Top 5 Factors That Affect Gold Rate in India

1: What is one of the primary reasons that impact the price of gold?

One of the most crucial factors affecting gold price is the demand-supply inequality no matter how many ever factors there are. But this demand-supply mismatch can be influenced by various aspects.

2: s there a relationship between the dollar and the rise in the price of gold? 

There is a negative correlation between the rise in the price of gold and the US dollar. When the value of the US dollar rises, the price of gold falls as the dollar is seen as the best investment option. But when the price of the dollar falls, investors turn to other forms of accumulating value. Gold is often seen as the best pick, and the price of gold rises due to more demand.

3: Which association has control over the gold price in India?

The Indian Bullion Jewelers Association (IBJA) plays a vital role in deciding day to day gold rates in the country. 

4: Will the rate of gold increase in the future?

The projection for the rise in the price of gold in the medium term is positive. The rate of gold is expected to increase even if factors such as inflation concerns and the pandemic make this unpredictable. Prices are expected to move in the range of 1,700 to 1,900 USD an ounce in the first half of 2022 and cross USD 2,000 in the second half. In the Indian market, the figures may be in the range of 45,000 to 50,000 in the first half and move past Rs 55,000 in the second half of 2022 for Multi Commodity Exchange.  

5: What is the highest price of gold in the industry?

Gold touched an all-time high of 2074.88 in August of 2020 historically.