Gold has always held a special place in India not just as a valuable asset but as a symbol of culture, tradition and even security. Whether it is worn as jewelry or kept as a savings tool, gold remains deeply embedded in the fabric of Indian life. With time the price of gold has been climbing to new heights, making many pause and wonder Why is it so expensive?. In March 2025, the cost of 24 carat gold reached Rs. 89,333 per 10 grams and 22 carat gold was not far behind at Rs.81,886.

So what’s driving this surge? A big part of the story lies in the turbulent global economy with the US’s controversial tariff policies causing a ripple effect. This has shaken the dollar and sent gold prices to a record $3,029 per ounce. The spike in prices during the first quarter of 2025 is unlike anything we have seen before, surpassing previous gains by 18%. So, why are Indian investors still jumping in, even with such high prices? It is a question worth exploring especially when you consider what this means for India’s economy and its relationship with gold.

The Perfect Storm: Understanding the Rapid Increase of Gold Prices

1.The Threat of US Tariffs and The Trade War

Gold recent increase is being driven by the tariffs imposed by the US and geopolitical tension. Gold is expected to benefit from global economic turbulence. The USA has declared a set of tariffs that will come in place in early April, 2025. Tariffs will be placed on foreign imports and on April 2nd, reciprocal tariffs will take place. Auto tariffs that will come into effect on April 3rd are likely to follow, alongside secondary Russian Oil purchase tariffs. These measures further reduce the global economic sentiment and increase the shift of investments into gold. There is no doubt that gold performs well while there is geopolitical conflict and trade barriers and this case is just like the rest.

2.Increased Concern of Inflation Alongside A Weakening Dollar

There have been slackening indications, softening the pressure on the US dollar index which is bad news for the gold price as the suppression leaves it more affordable. Another concerning factor is the inflation alongside the anticipated statement that an interest rate drop will not happen any time soon. For the time being, lower interest means less paying gold, which serves as a noninterest yielding asset, becomes more pleasant to hold since the cost that comes with holding it is much lower.

3. Russian Conflicts and Sanction Policies Along with Tensions with Other Nations

Aside from currency restraints, global conflicts are intensifying the interest in gold. The anticipated sanctions against Russia for its Ukrainian war activities has created more uncertainty in the market. As has been the case in previous conflicts, gold is the most sought after resource and with heightened fears of market extensions, the demand for gold has increased remarkably.

4. Strong Demand for Gold and Continuous Purchases by The Central Bank

The Headquarters of the RBI has not only been purchasing gold, but the Central Banks in general have also increased their reserves. The RBI’s gold reserves rose to 854.73 tonnes after adding 32.63 tonnes in the first two quarters of FY25. This represents a global trend shift by central banks towards increasing economic instability and moving away from dollar dominated reserves. Moreover, rising stockpiles in approved warehouses also indicate increased demand.

India’s Gold: A Cultural and Economic Perspective

The rally in gold holds special significance in India. Because of the metal’s deep cultural connection, demand at this time of the year is peak season for weddings and other celebratory periods such as Diwali. There have been mixed reactions to the prevailing 32% price hike in FY25. While it does put the eternal value of gold in perspective, it does put challenges ahead of retail buyers who may see these prices as too steep.

Interestingly enough, India’s gold imports have fallen significantly over the last one year, pointing towards a shift in the market dynamics. While institutional and investment demand for gold exchange-traded funds continues to remain strong, steep prices can be deterring physical buying. Speculative position and weakening rupee also play a role in the domestic price hike. All these contribute to the rupee cost as world prices rise.

Market Outlook: Volatility Ahead?

Experts are optimistic about gold’s direction but are warning of possible volatility in 2025. Here are some expert opinions:

• Market experts opine that increased trade tensions and tariff uncertainties have fueled gold demand as a hedge. If tariffs increase, gold prices may cross $3,100 per ounce, which would mean around Rs.90,000 to Rs.91,000 per 10 grams in India. But a settlement of trade tensions may lead to profit-taking, causing a short-term fall.
• Technical analysts point out that gold has important support levels at $3,050–$3,032 per ounce and resistance at $3,092 to $3,110 per ounce. Support in India is at ₹88,270 to ₹87,980 per 10 grams, with resistance at ₹88,790 to ₹88,990 per 10 grams. These levels point towards a possible consolidation phase.
• •Some analysts forecast sharp price fluctuations as the US Federal Reserve grapples with its policy stance. A stronger dollar or move towards riskier assets may pose downside risks.

The next US Personal Consumption Expenditures (PCE) report and Federal Reserve policy announcements will be key. If inflation slows more than anticipated, rate cuts could gain momentum, further fuelling gold. On the other hand, sustained inflation could prompt a more conservative Fed response, curbing the rally.

Investment Insights: Should You Buy Now?

For Indian investors, the key question is whether to invest at these record levels or wait for a pullback. Here are key considerations:

Pros of Investing Now

•Safe-Haven Demand: With tariffs, sanctions and geopolitical uncertainty, gold continues to be a safe hedge.

•Long-Term Growth: Analysts foresee sustained demand from central banks and ETFs, offering structural support to prices.

•Inflation Protection: Gold has in the past been used as a hedge against inflationary pressures.

Risks to Watch

Volatility: Short-term corrections are likely if tariff anxieties subside or profit-taking is triggered.

•High Entry Point: Prices are at all-time highs, which could restrict short-term upside.

•Dollar Strength: US dollar rebounding could top gains, particularly if Fed policy becomes tighter.

Strategies for Investors

Staggered Buying: Rather than invest a lump sum, use dollar-cost averaging to minimize risk.

•Diversified Choices: Apart from physical gold, consider gold ETFs, sovereign gold bonds or digital gold for improved liquidity.

•Long-Term Perspective: Gold’s upsurge benefits investors with a 5–10-year perspective, which aligns with India’s cultural predisposition towards the metal.

Conclusion: Gold’s Golden Moment

Through March 31, 2025, gold is having a record run, fueled by US trade policies, geopolitics and macroeconomic realignments. In India, where gold is an emotion as well as an investment, this rally testifies to its abiding popularity despite record prices threatening customary buying habits.

For investors, the solution is balance: taking advantage of gold’s haven status while being sensitive to volatility. Whether an experienced investor or a holiday buyer, watching worldwide events, particularly US tariff action and Federal Reserve policy, will be vital. As gold sets its sights on the $3,100 per ounce benchmark across the world and Rs. 90,000 per 10 grams in India, one thing is for sure: its ride in 2025 is only just beginning