Context:
The price of 24-carat gold surged to Rs 1 lakh per 10 grams for the first time in India
Global Factors Driving Price Surge in Gold:
- Geopolitical Tensions: Conflicts and global economic uncertainties have boosted gold’s demand as a safe-haven asset.
- US Federal Reserve Rate Cuts: Lower interest rates enhance gold’s attractiveness by reducing the opportunity cost of holding non-yielding assets.
- Weakening US Dollar: A declining dollar makes gold cheaper for non-dollar buyers, increasing global demand.
- Central Bank Accumulation: Asian central banks are buying gold in bulk to diversify reserves and minimize dependence on the US dollar.
India’s Gold Market:
- India is the 2nd largest consumer of gold globally, with 2024’s demand at 802.8 tonnes.
- Roughly 85% of India’s gold is imported, making its prices highly dependent on international trends.
- Reasons for High Gold Demand –
- Financial Security: Gold is valued as a stable, long-term asset during periods of inflation or instability.
- Cultural Importance: An essential part of festivities, seen as auspicious.
- Wedding Boost: High demand during wedding seasons for traditional jewellery gifts.
- Rural Significance: Limited access to financial institutions makes gold a reliable saving, investment, or borrowing medium.
Gold Reserves:
- India –
- Largest gold ore reserves: Bihar (43%), followed by Rajasthan (24.92%) and Karnataka (20%).
- Top in metal content: Karnataka, then Rajasthan, Andhra Pradesh, and Bihar.
- World –
- Largest gold holders: United States, Germany, and Italy.
- Key exporters: Germany, European Union, Switzerland.
Source: DD India
Previous Year Question
What is/are the purpose/purposes of Government’s ‘Sovereign Gold Bond Scheme’ and ‘Gold Monetization Scheme’?
1. To bring the idle gold lying with Indian households into the economy.
2. To promote FDI in the gold and jewellery sector.
3. To reduce India’s dependence on gold imports.
Select the correct answer using the code given below:
[UPSC Civil Services Exam – 2016 Prelims]
(a) 1 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3
Answer: (c)