Why Gold Prices Rise in India Even When International Rates Fall
Even when global gold prices decline, domestic gold prices in India often continue to rise. The primary reason is the depreciation of the Indian rupee against the US dollar.
Since India imports the majority of its gold and international pricing is done in US dollars, a weaker rupee makes gold costlier for Indian importers. As a result, domestic prices can rise even if global spot rates fall. For example, a 5–6% increase in international prices combined with rupee depreciation can result in nearly a 12% rise in Indian market prices.
Other Contributing Factors
Import duties and taxes:
Fixed charges such as customs duty, AIDC, and 3% GST continue to push prices upward, regardless of global price movements.
Local demand surges:
During festival and wedding seasons, or when investors shift toward safe assets, demand increases, pushing Indian prices higher.
Logistics and regional pricing:
Coastal cities like Chennai, located close to major ports, may experience comparatively lower logistical costs, while inland regions face higher distribution expenses, increasing final prices.
Conclusion
The divergence between international and Indian gold prices reflects the dominant influence of currency fluctuations, further amplified by domestic demand, taxation, and logistics. As a result, Indian gold prices may rise even when global rates drop.
