Recent surge in gold and silver prices due to geopolitical tensions, says Finance Ministry
New Delhi: The recent surge in prices of gold and silver is largely attributable to heightened geopolitical tensions and uncertainty over global growth, which have boosted safe-haven demand, the Finance Ministry said on Monday.
In a written reply to the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said domestic prices of precious metals like gold and silver are primarily determined by their prevailing international prices (in US dollar terms), the exchange rate of the Indian rupee against the dollar and applicable taxes/tariffs.
“The recent surge in prices is largely attributable to heightened geopolitical tensions and uncertainty over global growth, which have boosted safe-haven demand, including substantial gold purchases by central banks and major institutions worldwide,” he said. He was replying to a question related to increase in gold and silver prices.
Chaudhary further said while prices of gold and silver have witnessed a rising trend in the current year, it may have differential effects across states or population groups depending upon the degree of socio-cultural and economic reliance over these precious metals.
They serve a dual role — not only as a consumption item but also as an investment avenue, as they are considered safe assets for hedging against uncertainties.
Thus, an increase in the price of gold or silver positively influences household wealth, as the notional value of existing gold or silver holdings appreciates, the minister said.
For prospective buyers, he said purchases represent a shift from one form of asset (cash) to another (gold or silver), whose value may appreciate over time.
He emphasised that the prices of precious metals are determined by the market and the government is not involved in the price fixation. He also added that RBI and government regulation of bullion imports through nominated agencies, banks and refineries improves traceability, reduces grey market channels and helps domestic prices more smoothly track global benchmarks rather than react to shortages or speculative spikes.
