Table of Contents
We have analyzed the last 5 years…”gold & silver prices have increased suddenly. Why prices are hiking (or surging)Their impact on the economy, and all important related topics.
Gold & Silvers Rates (Syllabus GS 1, GS 3)
GS 1 Geography & Society , GS 3 Economy
1.Current Market Trends
In late 2025, both metals witnessed a “Metallic Rush,” with silver significantly outperforming gold in percentage growth. why gold prices increasing & shares downfall?
| Gold / Silver | Current Rate (Approx.) | Trend Analysis (2025) |
| Gold (24K) | ₹1,40,000+ per 10g | Rose ~50% in a year; |
| Silver | ₹2,50,000+ per kg | Doubled in 11 months; |
2.Factors Driving Prices (UPSC GS-3)
It is critically important to understand why it occurs in Mains exams than its occurrence rate itself.
Safe Haven Demand: Global geopolitical tensions (Russia-Ukraine conflict and tensions between West Asia nations) drive investors away from ‘fiat’ money into ‘hard’ assets. gold investment safe than another investment.
Central Bank : The RBI, along with other central banks (China included) has been actively building up their gold reserves, diversifying their holdings away from US Dollar (De-dollarization).that means the Central bank hods gold reserve in there quota.
Inverse Correlation with Interest Rates: The US Federal Reserve lowering interest rates makes gold more preferable since the “opportunity cost” of holding non-yielding gold will be low. about this UPSC asked question in 2021 UPSC CSE pre.
“Currency Depreciation”: The rupee depreciation continue so its impact on imports & export. the gold mostly import from outside of country, its create trade deficit and rupee depreciation continue. As the Indian Rupee (INR) depreciates against the United States Dollar (USD), the cost of gold/silver imports escalates due to an increase in the price of gold/s
Industrial Demand (Silver): In many industrial appliances Silver is used an industrial metal. The force of solar power, 5G networks, and Electric Vehicles has created a monstrous deficit.
3.Impact on Indian Economy
“High gold/silver prices form a double-edged sword for India”:
Positive Consequences
Wealth Effect: Middle class & lower middle class section of society looked gold as there secure investment. Since Indian households are estimated to hold 34,600 tonnes of gold, worth ~$3.8 trillion, an increase in prices will raise the “paper wealth” of the middle class, which can have a positive effect on consumption.
Gold Recycling: Higher gold prices can “encourage people to sell old gold,” thus increasing domestic supply, thereby lessening reliance on imported gold.
Negative Impacts
Current Account Deficit (CAD): India have not much gold reserve, India mostly gold import dependent country so it creates trade deficit. It is a result of importing what is in abundance in the world, and the world’s second-largest consumer is none other than India. It is a country which consumes a lot but produces very little.
As a result of high prices, its import bill gets escalated, and CAD increase.
Distracting Productive Capital: Excess investment in the “idle” gold sector will redirect resources away from more productive industries such as infrastructure and the stock market.
4.Government Initiatives
For Prelims, focus and analyze the following terminologies to “financialize” Gold:
Sovereign Gold Bond Scheme: This is an investment in gold through paper form. The investor will earn market appreciation returns + approximately 2.5% per annum as interest. This is advantageous because it is free from risks of storage(already UPSC asked question from this topic)
Gold Monetization Scheme (GMS) – It intends to mobilize the excess gold held by the public and temples. It will be melted and used by jewelers, thus reducing imports.
Revamped Gold Deposit Scheme (R-GDS): A component of GMS where deposits can be made with varying periods ranging from short to longer periods with interest earned
Geography
Gold: Largest producer is Karnataka (Kolar Gold Fields – though mostly closed, and Hutti Gold Mines).
Silver: Mostly obtained as a by-product. Rajasthan is the leading producer (Zawar mines).
For more detail…