Why is the price of gold decreasing?
Gold prices decrease when demand for gold falls or when its cost rises against other assets. Check these six drivers to see why gold rate is decreasing on a given day.
- Stronger US dollar: Gold is priced in US dollars, so a stronger dollar makes it costlier for buyers in other currencies and lowers demand. Check the rupee-dollar rate.
- Higher interest rates: Gold pays no interest, so rising policy rates and bond yields make interest-bearing assets more attractive. Check central bank rate decisions.
- Easing geopolitical tension: Investors buy gold in uncertain times and sell as tension eases. Check the news on conflicts and trade disputes.
- Profit-booking after a rally: Why gold price decreasing episodes follow record highs is clear from October 2025, when investors sold to lock in gains.
- Slower central bank and fund buying: Gold loses a source of steady demand when central banks and exchange-traded funds buy less.
- Lower import duty: A duty cut lowers the landed cost of imported gold, and so lowers the domestic price when other factors stay the same.
Factors that influence gold prices
Key factors affecting gold prices work in both directions. The table shows when each factor pushes the price up and when it pushes it down.
| Factor | Price rises when | Price falls when |
|---|
| Inflation | Prices rise and investors want to protect purchasing power | Inflation cools and the need for protection eases |
| Interest rates | Rates fall and the cost of holding gold drops | Rates rise and bonds and deposits offer more return |
| Currency | The US dollar weakens, or the rupee weakens against it | The US dollar strengthens, or the rupee strengthens against it |
| Geopolitical events | Tension raises demand for safe-haven assets | Tension eases and investors move to other assets |
| Supply and demand | Jewellery and investment demand grows faster than mining and recycled supply | Demand weakens while mining and recycled supply holds |
| Global economic conditions | Downturns raise the appeal of gold as a safe asset | Strong growth moves investors to riskier assets |
| Import duty and GST (India) | Duty rises, which raises the landed cost | Duty falls, which lowers the landed cost |
These forces overlap, and several can act on the same day.
How are gold prices determined?
India has no separate domestic gold price. The international gold price, set in US dollars, is converted to rupees and then adjusted for import duty and local market premiums.
Domestic gold price = international price x rupee-dollar rate + import duty + local premium
The London Bullion Market Association (LBMA) publishes the LBMA Gold Price, a global benchmark set through twice-daily auctions. Buyers in India then pay Goods and Services Tax (GST) of 3% on the value of gold, and jewellery buyers also pay making charges. Check the gold rate today in India for the live rate.
Supply and demand set the international price. On the supply side, mining output, recycled gold and central bank sales matter. On the demand side, jewellery, investment and central bank buying matter.
How the 2025-26 Union Budget impacts gold prices
The 2025-26 Union Budget, presented on 1 February 2025, kept the customs duty on gold at 6%. It therefore left the landed cost of imported gold unchanged. It cut the duty on jewellery components under tariff item 7113 from 25% to 20%, effective 2 February 2025.
The 2026-27 Union Budget, presented on 1 February 2026, also left the gold duty unchanged at 6%.
How did the May 2026 customs duty hike affect gold prices?
The Finance Ministry raised the effective customs duty on gold from 6% to 15% with effect from 13 May 2026. The new rate has 10% basic customs duty and 5% AIDC. Reports link the hike to pressure on India's foreign exchange reserves.
A higher duty raises the landed cost of imported gold, so it pushes domestic prices up when other factors stay the same. A later duty cut would do the opposite.
Worked example. Assume imported gold costs Rs. 1,00,000 before duty. At 6% duty, the landed cost is Rs. 1,06,000. At 15% duty, it is Rs. 1,15,000, which is Rs. 9,000 more. These figures are assumptions for illustration, and they exclude GST, the local premium and making charges.
Why is gold considered a safe-haven asset?
Investors buy gold when other assets look risky. Five features support this role:
- Gold is not tied to one government's currency, so currency devaluation does not reduce what gold is.
- Gold is accepted worldwide and converts into any currency.
- Central banks hold gold in their reserves.
- Supply is limited by mining output and recycling.
- Gold has no counterparty that can default on a payment.
Gold also pays no interest, and its price can fall sharply, as on 21 October 2025. Safe-haven describes how investors behave in a crisis. It does not guarantee a stable price.
How do decreasing gold rates affect gold loan options?
Decreasing gold rates lower the amount you can borrow against the same gold. The lender values gold at the lower of two prices: the previous day's closing price or the 30-day average closing price for its purity. The India Bullion and Jewellers Association (IBJA) or a commodity exchange regulated by the Securities and Exchange Board of India (SEBI) publishes both. A fall appears in your valuation at once, while a rise lifts it more slowly.
LTV is the maximum share of your gold's value that the lender gives as a loan. The Reserve Bank of India (RBI) caps it by loan amount.
| Loan amount | Maximum LTV |
|---|
| Up to Rs. 2.5 lakh | 85% |
| More than Rs. 2.5 lakh to Rs. 5 lakh | 80% |
| More than Rs. 5 lakh to Rs. 2 crore | 75% |
Worked example. Rohan, 34, is a salaried professional in Delhi. His jewellery has an eligible value of Rs. 2,00,000, so his maximum loan at 85% LTV is Rs. 1,70,000. If the eligible value falls to Rs. 1,80,000, the maximum loan falls to Rs. 1,53,000. Branch valuation and credit assessment decide the final amount, so this example is not an offer.
Regulatory Context: The RBI issued the Reserve Bank of India (Lending Against Gold and Silver Collateral) Directions, 2025 on 6 June 2025. The Directions took effect on 1 April 2026 and cover LTV limits and valuation. Bajaj Finance applies them to every Bajaj Finance Gold Loan.
We do not simply use today's headline rate. We use whichever is lower between the previous day's closing price or the 30-day average closing price published by IBJA or a SEBI-regulated commodity exchange. This protects you from a sudden price spike inflating things unrealistically. You can pledge your 18-22 karat gold jewellery or ornaments, or gold coins up to 24 karat purity as collateral for our gold loan offering.
The maximum LTV eligible for a loan depends on the loan amount and cannot be more than the limits given. To know more, click here.
The LTV limit applies through the loan tenure. For bullet repayment loans, the LTV includes the interest payable at maturity. Ask your branch how a fall in gold's value affects your outstanding loan.
Bajaj Finance Gold Loan offers amounts from Rs. 5,000 to Rs. 2 crore, with interest from 9.50% p.a. and a tenure of 1 day to 12 months. Start your online gold loan application on the how to apply for a gold loan page, and then visit your chosen branch with your gold for assessment. See the gold loan interest rate and charges, and test different gold values in the gold loan calculator.
Do not let your gold sit idle. Tap into its value with a gold loan that suits your needs. Check your gold loan eligibility today!
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