Rupee Rally Sparks Four Percent Drop in Gold Prices

The Indian rupee's recent rally has led to a significant drop in gold prices, making it cheaper for consumers. The spot gold price has fallen by ₹7,270 per 10 grams, or four percent, in the last eight trading sessions to ₹1,54,884 on Friday from ₹162,154 logged on August 26.

The appreciation of the rupee against the dollar is a key factor behind this decline. The rupee has gained one percent to 94.49 on Friday against 95.35 on August 26, following a $127 billion mop-up through FCNR deposit. As a result, the value of dollar-denominated gold has depreciated, making it cheaper for consumers in rupee terms.

Domestic silver prices have also dipped four percent or ₹9,935 per kg to ₹2,35,456 on Friday from ₹2,45,391 logged on August 24. Prithviraj Kothari, President of the India Bullion and Jewellers Association, noted that consumers prefer to wait rather than buy gold during periods of uncertainty, leading to a bunching of purchases around perceived dips.

While the overall footfall may hold up reasonably well, the average ticket size and gold volume per purchase could see a mild dip if volatility persists. Rajesh Rokde, Chairman of the All India Gem and Jewellery Domestic Council, believes that the fall in gold prices should help boost demand during the upcoming festive season.