Gold in demand in a risk-averse world, local prices top Rs 95,000

Gold crossed the ?95,000 per 10 gram across India Thursday, in lockstep with price records globally for the safe-haven metal, as both central banks and exchange-traded funds (ETF) continue to pile into bullion through what's turning out to be a significantly volatile month for risk assets from Tokyo to Toronto.

Internationally, gold remained above $3,300 to a troy ounce Thursday, having surged 10% in a month - and 40% over a rolling 12-month period. This late surge has followed Donald Trump's tariff decisions, which have caused the emerging-market risk meter and currency volatility to rise, prompting haven purchases of the yellow metal through a period coinciding with a retreat for the US dollar index.

"With rising geopolitical tensions, central bank buying, and the possibility of economic instability, investors may want to consider increasing their gold allocation to 10-15% of their portfolio from the traditional allocation of 5%," said Renisha Chainani, head of research at Augmont Gold.

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She suggested retail investors buy physical bars and coins and gold-backed financial products, such as digital gold and gold exchange traded funds (ETFs).

Central bank net purchases of gold remained above 1,000 tonnes on average over the past three years, World Gold Council data showed, underscoring the role of institutional investors in lending pricing support to the yellow metal in absence of consumer buying. Central bank purchases are expected to stay significant this year, too, the WGC had said in its outlook for 2025.

Net gold purchases by ETFs until the end of March climbed the equivalent of 128 tons. Globally, ETF ownership of gold is expanding rapidly, marking a significant departure from the pre-Covid circumspection, to the equivalent of about 2,710 tons by the end of March.

Lukewarm Retail Demand

The India Bullion & Jewellers Association (IBJA), which provides pricing inputs for the central bank, non-bank lenders and mainstream banks for gold-product pricing and risk exposures, said the surge in retail prices by nearly a fifth since the start of the year is prompting ordinary savers to sell gold and make quick money.

On Thursday, the gold price in the domestic market stood at ?95,207 per 10 gm. With a Goods & Services Tax (GST) of 3%, 10 gm 24-carat gold was trading at ?98,063 per 10 gm on Thursday. Silver prices, on the other hand, had dropped to ?95,369 per kg on Thursday from ?96,575 a day ago.

"It will hurt the Akshaya Tritiya sales this year. Unless there is no requirement, consumers will not buy gold. They will buy silver instead," said Prithviraj Kothari, president, IBJA, and managing director of RiddhiSiddhi Bullion. "Reports trickling in from different parts of the country show that people are selling gold in good volumes. The trend has picked up more in the last one week."

Prices could harden further should global institutional demand continues. Gold has yielded positive returns for all but two years this millennium-in dollar terms.

"If this trend continues, then by next week 10 gm of 24 carat gold will be priced at ?1 lakh. This is not only hurting the consumers, but the trade too. Small jewellers are at a loss," Kothari said.

Trade executives said that most of the jewellers have now started manufacturing lightweight jewellery. "The maximum weight of these pieces is 10 gm. Mostly are in the 7-8 gm range," said an executive.

Consumer demand for gold has remained circumspect due to the price surge lately. "Reports indicate that sales have dropped as much as 30-40% as consumers postpone purchases, opting to exchange old jewellery, rather than purchase new jewellery," said Chainani at Augmont Gold.