10 Factors That Influence Gold Prices in India: Complete Analysis

Gold prices in India are affected by factors such as inflation, exchange rates, local taxes, seasonal demand, and more. Understanding these factors is key to understanding why rates fluctuate and making informed financial decisions. Let's look at each factor that impacts the gold market in India.

Factors Affecting Gold Prices in India

While differing in impact, each of these factors plays a role in determining the rate of gold in India:

1. Demand and Supply

Gold demand in India mainly comes from jewellery purchases and investment needs, rising when demand exceeds the supply available from gold mining companies or gold imports. Additionally, even seasonal factors can affect outcomes, e.g., a good monsoon can support rural incomes, which may increase local demand for gold.

Also Read: How Gold Price Fluctuations Affect Your Gold Loan

2. Inflation

Gold acts as a hedge against currency devaluation when inflation rises. Most investors start buying gold to preserve their wealth in such times. When investors turn to the yellow metal for safety, gold prices usually move higher.

3. Interest Rates

There’s an inverse relationship between interest rates and gold. Whenever banks or financial institutions offer high interest rates on savings accounts, gold becomes less attractive as an investment because it does not generate passive income. This can cause its price to drop.

4. The Value of the US Dollar

Globally, gold is traded in the US dollar. A weaker dollar makes gold cheaper for buyers holding other currencies, increasing global demand and driving higher gold prices. A strong dollar usually has the opposite effect.

5. Indian Rupee vs. US Dollar Exchange Rate

Aside from the US Dollar value, currency fluctuations relative to the INR also have a direct impact. India imported nearly ₹5 trillion worth of gold in FY25, underscoring its reliance on overseas supplies. If the Indian currency weakens against the dollar, importing gold becomes more expensive, directly increasing the gold price in India.

Also Read: How to Calculate Gold Loan Interest Rates

6. Government Policies and Local Taxes

Government policies on import duties and the Goods and Services Tax (GST) structure significantly impact gold prices. Additionally, local taxes and transportation costs cause slight variations in the gold price between different cities. Finally, the Indian Bullion Jewellers Association (IBJA) plays a key role in determining India's daily gold rates.

7. RBI Reserves

India's central bank, the Reserve Bank of India, holds gold in its reserves. When central banks buy large quantities of gold, it signals confidence in the asset and a potential lack of faith in currencies, which boosts global demand and prices.

8. Global Market Conditions (Economic and Political Events)

During periods of economic uncertainty, recessions, pandemics, or geopolitical tensions, gold is considered a safe investment. Investors tend to move their money from volatile assets like stocks into this tangible asset for stability, driving up international gold prices.

9. Festive and Wedding Seasons

In India, gold has immense cultural significance. Market demand for gold ornaments and gold coins naturally spikes during Diwali and Akshaya Tritiya, as well as during the prominent wedding season, driving local rates higher. In fact, despite record-high rates, India's gold imports nearly doubled in September from August 2025. While demand spikes seasonally, its impact is short-term compared to structural drivers like inflation and currency exchange

10. Jewellers’ Hedging

Large jewellers sometimes hedge their positions in the futures market; to protect against rising gold prices, they may buy gold in advance at a fixed price. This activity in the commodity market can also influence current and future gold prices.

Also Read: What is 1 Pavan of Gold in Grams and How is It Calculated?

To Conclude

Gold prices in India are dynamic and can be influenced by multiple local and international factors. Having a proper idea of these factors can help you make better financial decisions. 

If you’re looking to access quick funds, a Gold Loan from Poonawalla Fincorp helps you make the most of the value of your gold jewellery. Apply online for fast approval, minimal paperwork, and competitive interest rates.

FAQs

Where can I find the latest gold rates in India?

You can find reliable live gold prices on the official website of the Indian Bullion and Jewellers Association (IBJA), from reputable jewellers, and on major financial news portals.

Why is the price of gold jewellery higher than today’s gold rate?

The final price of gold jewellery includes more than just the value of the pure gold. It also covers making charges, wastage, and GST on the entire amount, which is why a piece of hallmarked gold costs more than the simple market rate per gram in India.

What is the difference between physical gold and digital gold?

Physical gold refers to tangible assets you can hold, like gold coins or gold ornaments. Digital gold, also known as paper gold, includes investments such as Sovereign Gold Bonds (SGBs) and Gold ETFs. While both track the current market price of gold, digital gold does not involve making charges or storage concerns.

Is there a ‘best’ time to buy gold in India?

While there’s no single ‘best’ time, it helps to track gold prices. Historically, gold prices tend to be lower when financial markets are stable and interest rates are high. Many people also strategically make a gold investment before the festive season to avoid price rises caused by high local demand.