KOCHI: Gold prices in Kerala have surged to an unprecedented high, crossing the historic milestone of ₹85,000 per sovereign (8 grams) for the first time in history. The relentless rally, which is causing significant concern for consumers ahead of the festive and wedding seasons, is driven by a record-breaking spike in international gold prices, a weakening US dollar, and falling bond yields.
On Monday, the price for one sovereign of gold skyrocketed by ₹680 to reach a new all-time high of ₹85,360, eclipsing the previous record of ₹84,840 set on September 23. The price per gram also saw a steep hike of ₹85, touching ₹10,670. The surge reflects a dramatic doubling of the precious metal’s value in just two years, as prices hovered around the ₹40,000 per sovereign mark in early 2023.
The domestic price surge is a direct consequence of gold’s stellar performance in the international market. Spot gold prices shattered previous records, crossing the psychological barrier of $3,800 an ounce to trade at $3,806.36. This new peak is fueled by strong market speculation that the U.S. Federal Reserve will implement further interest rate cuts to manage inflation.
Lower interest rates typically reduce the appeal of fixed-income assets like government bonds, prompting investors to flock to gold as a “safe-haven” asset. This shift was evident as the 10-year U.S. Treasury yield dipped from 4.177% to 4.16%, and the U.S. Dollar Index (DXY) fell from 98.16 to 97.94. A weaker dollar makes gold cheaper for holders of other currencies, further boosting its demand.
The cascading effect of these global factors has made gold jewellery significantly more expensive in India. With a conservative making charge of 5% and 3% GST, the effective cost of a single sovereign of gold jewellery in Kerala is now over ₹92,300. For ornaments with a 10% making charge, the price is approaching ₹97,000. Analysts warn that if the current international trend continues, prices could see another hike and potentially cross the ₹86,000 mark soon.
