Bhoomika Singh
Gold has long held a special place in the hearts and wallets of Indians. India is one of the world’s largest consumers of gold, and its citizens have a deep-rooted cultural affinity for the metal. This means that global events and geopolitical situations have a direct impact on gold prices within the country.
Geopolitical situations, such as conflicts, diplomatic tensions, and political instability, have a significant influence on the global economy and financial markets. Gold often benefits from this uncertainty, as investors seek safe assets in times of turmoil.
India imports a significant portion of its gold, and changes in international prices are reflected in local markets. When global tensions lead to higher gold prices, it becomes more expensive for Indian consumers.
Speaking of which, the Co-Founder of Plus, a jewellery-saving app, Veer Mishra explains, “The ongoing conflict in Ukraine and rising tensions between the US and China have kept gold prices elevated in recent months. Gold is seen as a safe-haven asset during times of uncertainty, and investors have been flocking to the metal as a hedge against geopolitical risks.”
The Indian jewellery industry, which relies heavily on gold, is sensitive to price fluctuations. When gold prices rise, consumers may reduce their jewellery purchases, affecting the entire supply chain, from miners to retailers.
“The Indian rupee has been falling against the US dollar in recent months, which has made gold imports more expensive. This has put downward pressure on gold prices in the domestic market,” Mishra added.
When geopolitical tensions escalate, investors become nervous about the stability of traditional assets like stocks and currencies. They turn to safe-haven assets like gold, driving up demand and, consequently, its price.
Mishra further added, “Investors who are considering buying gold should carefully consider their investment goals and risk tolerance. Gold is a relatively illiquid asset, and its price can be volatile. However, it can also provide a hedge against inflation and other economic risks.
Despite the recent decline, gold prices are still higher than they were a year ago. In September 2022, 22-carat gold was trading at ₹4,950 per gram, while 24-carat gold was trading at ₹5,450 per gram.”
