Posted on April 3, 2025, by Niftynews
Gold prices have skyrocketed to a record high in 2025, touching $3,164 per ounce. With escalating global trade tensions, primarily due to Donald Trump’s tariffs, investors are flocking to gold as a safe-haven asset, further pushing its prices up. The question now is: How will this surge impact India gold jewelry market, the second-largest consumer of gold worldwide?
The Effect of Trump’s Tariffs on Gold Prices
The latest spike in gold prices follows Trump’s announcement of reciprocal tariffs on 180 countries, intensifying global trade uncertainty. Investors are shifting their wealth from risky assets like equities to gold, which has historically been seen as a safe bet during times of economic instability. As a result, gold has reached new heights, and this trend is expected to continue, with some analysts predicting prices could soon exceed $3,500.
The Booming Gold Market: Is There a Slowdown in Sight?
India’s gold market plays a pivotal role in global demand, with the country’s jewelry market historically thriving during key cultural events, festivals, and weddings. However, as prices continue to soar, there is concern that higher costs will lead to reduced demand.
Over the past year, gold prices have surged by an impressive 27%, and the trend shows no signs of slowing down. As a result, jewelry retailers are observing a slight dip in footfall, with customers adopting a “wait and watch” approach before making significant purchases.
Despite this, there is still optimism in the market. During Padwa celebrations, 800 kg of gold was sold across India. Though this was slightly lower than the previous year, it suggests that while demand has softened, it hasn’t collapsed entirely.
Will High Gold Prices Deter Indian Buyers?
The big question for India’s jewelry sector is whether the current gold price surge will lead to a prolonged slowdown in demand. According to Mahendra Luniya, a Digital Gold Expert, while some consumers are waiting for prices to stabilize, there is little indication of a major downturn. He explains that gold remains deeply embedded in Indian culture and is seen as both a symbol of wealth and a store of value.
However, the increase in gold price has resulted in a shift in purchasing patterns. Consumers are now purchasing gold only when necessary, indicating a more cautious approach to buying. With no major festivals or wedding seasons at the moment, it’s expected that sales will rebound once the prices stabilize and the summer holidays approach.
Factors Driving Gold Prices: Is Central Bank Demand the Key?
While central banks have been accumulating gold in significant quantities, it’s the global uncertainties and political tensions that are playing a more significant role in pushing gold prices higher. Trump’s protectionist policies, particularly his reciprocal tariffs, have added to the volatility in the global markets. Coupled with ongoing geopolitical issues in the Middle East and Eastern Europe, these factors have provided further impetus for gold’s upward trajectory.
As Luniya points out, global trade wars and military conflicts are likely to keep gold prices elevated, with predictions pointing toward prices surpassing the $3,300 mark in the coming months.
What Does the Future Hold for Gold in India?
India’s relationship with gold is unlikely to fade, even in the face of rising prices. The country remains a massive consumer of gold, especially during cultural and religious occasions. While gold jewelry demand may temporarily dip as prices rise, it is expected to bounce back once there is price stability. If the rupee continues to weaken, gold prices in India could reach new record highs, further affecting consumer behavior.
In conclusion, while the surge in gold prices presents challenges for India’s jewelry sector, the country’s longstanding affinity for gold may help the market weather this storm. The key will be whether gold prices stabilize or continue their relentless climb amid ongoing global tensions.
