Gold holds a special place in the history of India. Along with its high monetary value, people also look up to it as a symbol of wealth and prosperity. No wonder, it is also deeply rooted in our most important celebrations – festivals, traditions, ceremonies, or rituals.
Over the period, the gold price has witnessed an increasing trend. Have you ever wondered how and why? Well, it can be because of many factors combined. Having a close look at the history of gold prices in India helps in understanding the economic policies, global influences, investment trends and consumer behavior.
Let’s take a look at the most important milestones that have contributed to the gold price history of India.
Gold Pricing in India – The Initial Years
As mentioned earlier, the Gold price in India has always been determined by a lot of factors – both domestic as well as global. The prices of gold were somewhat stable after the independence of India. This was mainly because of the controlled economy of the country and limited international trade.
- 1950s to 1960s:
During this period, the gold prices revolved around ₹100-200 per 10 grams. Indians took Gold as a store of value rather than an investment whose value could increase overtime. As a country, all efforts were more focused on rebuilding and regulating the economy. The import of gold was also strictly controlled.
- The 1970s: The Beginning of Price Fluctuation
The 1970s saw a significant shift in global economics and the pricing of Gold. The prices of Gold reached an all-time high all over the world, mainly because of two major events – the collapse of the Bretton Woods system and the 1973 Oil Crisis. As a result, the price of Gold in India took a major leap, reaching almost ₹540 per 10 grams by 1975.
Another factor that added fuel to this fire was Gold Smuggling. With the rising prices of Gold and strict restrictions by the Government on Gold imports, gold smuggling became more prevalent during this period. The black market for Gold flourished in India, which reflected a huge gap between the domestic demand and supply of Gold in the country.
- The 1980s: Gold Perceived as a Financial Asset
The 1980s was an important period from the perspective of the gold market in India; The Indian Government relaxed import restrictions on gold, but due to increasing domestic demand and economic uncertainties, the price of Gold continued to witness an upward trend. By 1985, gold prices had crossed ₹2,100 per 10 grams, and it was perceived more as a financial asset by the Indians. At that time, the Indian economy relied heavily on agriculture and the country witnessed an increase in gold demand during bumper harvests, a good example showcasing the cultural importance of gold in India.
- The 1990s: The Decade of Economic Liberalization
The 1990s was a major period of transformation, both for the economy of India and for the market of gold. Many economic reforms took place in the country that opened the global markets and liberalized trade.
In the year 1991, India faced a severe payment crisis and had to pledge 67 tons of gold as collateral for a loan from the International Monetary Fund (IMF). By the mid-1990s, the price of gold increased to around ₹4,000 per 10 grams.
Another interesting thing that happened during this decade was the formalization of gold-backed financial instruments, like gold loans. This further integrated gold into the financial system of India.
- The 2000s: The Bull Run in Gold Prices
The 2000s brought a sustained bull run in gold prices and it was perceived as the only safe haven. The dot-com bubble burst, the 9/11 attacks and the 2000 global financial crisis were a few of the key drivers that led to an increase in the demand for investment in gold. It was during this period that the gold ETFs (Exchange-Traded Funds) were introduced in India to provide investors with an option to invest in gold without physical possession. From ₹4,400 per 10 grams in 2001, the price of gold rose to ₹14,000 per 10 grams in 2009.
- The 2010s: Record Highs and Market Dynamics
The 2010s witnessed an all-time high because of multiple factors – domestic as well as international. By 2011, the price of gold reached up to ₹26,400 per 10 grams, mainly because of the fluctuation in the prices of oil and the Eurozone debt crisis. However, the prices remained somewhat stabilized in the following years at ₹25,000 per 10 grams,
Later, in 2016, the Government of India did a Demonetization drive that temporarily disrupted the gold market. To convert their unaccounted cash, people rushed to buy gold, which led to a short-term rise in prices.
In 2017, the Goods and Services Tax (GST) was introduced in India which stated a 3% tax on gold. However, this move had a mixed impact. While it streamlined tax compliance, it also increased the cost of gold purchases.
- The 2020s: Gold during COVID-19 and Global Uncertainty
The current decade has already witnessed unusual events that have influenced the price of gold in India. The COVID-19 Pandemic in 2020 led to a global economic slowdown. This led to a rise in gold prices by as much as ₹56,000 per 10 grams in August 2020.
Later, after the economies recovered globally, the gold prices moderated a bit but remained high because of inflation and fluctuating vale of the currency.
The 2020s have also witnessed the rise of digital gold investment options in India. Because of the fractional quantities, the gold investment was accessible by a wider audience. Now anyone can invest in gold without a hefty investment.
Trends Affecting the Gold Market in India
India is a land of cultures where every festival has one or the other rituals followed. Festivals like Dhanteras, Diwali, and Akshaya Tritiya witness a surge in gold purchases, resulting in seasonal demand for gold in India.
When it comes to investment in gold, there are many options available in India. Such as digital gold, gold ETFs, sovereign gold bonds, etc. This has again led to the popularity of gold as a safe investment option.
International events like political situations, currency fluctuations and crude oil prices, play an important role in determining gold prices in India.
Factors Affecting the Prices of Gold in India
Since India imports most of its gold, global price fluctuations directly affect the rates within the country.
With the weakening of the rupee, the cost of imports increases. This leads to a rise in the price of gold and vice versa.
People often see gold as a hedge against inflation. Thus, during a period of economic uncertainty, the demand for gold increases. This, again, leads to an increase in the price of gold.
Government-related factors, like Import duties, taxes, and trade policies also determine the price of gold in India.
Take Away
Indians have a deep embedded love for gold which doesn’t seem to be fading anytime soon. For years, gold has symbolized wealth, status, and security.
As we look to the future, the importance of gold in India continues to increase, influenced by both ancient traditions and market conditions.
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