Gold Hits New Record Highs as Indian Demand Surges

Gold prices reached unprecedented levels in September, driven by increased demand from India, a U.S. interest rate cut, and global geopolitical instability. The price of gold surged to $2,685.58 an ounce on Thursday, marking a 30% increase since the start of 2024.

India, the world’s second-largest consumer of gold, significantly boosted demand after reducing its gold import tax in July from 15% to 6%. This policy change triggered a surge in local purchases of gold jewelry, bars, and coins. Imports into India tripled in August, reaching $10.1 billion, according to the World Gold Council.

The rally in gold prices has been further supported by its status as a safe-haven investment amidst ongoing conflicts in Ukraine and the Middle East, along with the U.S. Federal Reserve’s 50 basis point interest rate cut in September. This shift has also encouraged central banks to shift reserves from the U.S. dollar to gold, fueling a process of “de-dollarization.”

India’s demand spike comes during its festival and wedding season, with Diwali driving purchases of gold jewelry. Favorable monsoons in rural areas have also bolstered gold purchases, as improved crop yields boost the economy.

Meanwhile, China, the world’s largest gold consumer, is seeing weaker demand for gold jewelry amid economic challenges, though new measures have been announced to stimulate demand.