Gold Prices Cross INR 1 Lakh for the First Time: What’s Powering the Surge?

In India, gold has crossed the INR 1 lakh per 10 gram threshold for the first time in history, marking a key moment for the precious metal. The recent price move was very much an international one, with gold climbing past USD 3,400 an ounce. Instability in worldwide financial markets, which U.S. President Donald Trump has worsened with his controversial economic policies, has sent many investors scurrying to the largely forsaken yellow metal as a safe haven. Gold is now establishing itself as a hedge against whatever the President might throw at the nation and the world.

As of Tuesday, 24-karat gold was trading at INR 101,350 per 10 grams in the Mumbai bullion market. The variant of 22 karats was standing at INR 92,900. The broader flight to safety among investors, who are turning away from riskier assets, is emblematic of a potential period of prolonged inflation and unpredictable monetary policy. It also makes a curious case for gold's rising demand.

Trump’s Fed Overhaul and Dollar Slide Drive Momentum

An increasing contributor to the gold rally is the friction that is growing between President Trump and the U.S. Federal Reserve. His public criticism of Jerome Powell, the current Fed Chair, and his demands for aggressive interest rate cuts have unmoored investor confidence. The U.S. dollar has since been set adrift, falling to its lowest level since 2022. The dip has rendered the once-mighty dollar much less appealing to global investors, which has in turn made gold much more appealing by comparison, yielding a less-than-flattering chart for the greenback.

India’s Enduring Love for Gold Remains Strong

India, the world’s second-largest consumer of gold after China, keeps showing resolute demand. In 2024, the country used up 802.8 metric tonnes of gold, an uptick from the 761 tonnes tallied the prior year. The overall worth of this demand shot up to INR 5.15 lakh crore, per numbers from the World Gold Council.

The cultural importance of gold in India runs very deep. Gold is often seen as a store of value that can be passed down through the generations. When families experience times of financial distress, say, to fund a medical emergency or to pay an educational expense, they often try to use gold as a means to secure a loan. And because prices have been going up, gold-backed loans have only become more appealing since the opportunity is there to use easy digital platforms to access them and, of course, because gold is always said to be good for securing a loan.

As costs rise, the need for gold loans is gathering speed. With the economy taking a hit and inflation not expected to go away anytime soon, people are using gold as an asset they can both depend on and lend against. This trend only seems likely to increase, especially if instability in the geopolitical realm and devalued currencies stay in play.