Gold glitters at record high: Price in Kerala breaches ₹80,000 per sovereign; gram rate sets new mark

Gold prices in Kerala soared to record levels on Tuesday, crossing the ₹80,000 mark per sovereign for the first time in the state. The price of a sovereign (8 grams) surged by ₹1,000 in a single day, reaching ₹80,880.

In tandem with this spike, the price of one gram of gold also breached a new benchmark, rising by ₹125 to ₹10,110, according to the All Kerala Gold and Silver Merchants Association, which determines the daily rate of the yellow metal in the state. 

The hike in gold prices comes as a blow to customers, many of whom could be deterred by the exorbitant increases witnessed over the past few months. To purchase a gram of gold, buyers currently need to pay 5–10 per cent above the base rate, which includes 3 per cent GST and additional making charges, according to jewellers. 

Despite the steep rise, jewellers say their revenues have not taken a hit. Bhima Group Chairman Dr B Govindan said that while gold prices remain high, customer spending, especially for weddings, has remained consistent. "Though the prices are high, the amount customers spend, particularly for marriages, hasn’t changed. They are simply receiving a smaller quantity of gold for the same amount. Still, they get fair value for their money," Govindan said, adding that for jewellers, the turnover in terms of gold quantity sold has decreased.

The current spike in gold prices in Kerala is largely attributed to a surge in international gold rates, which have breached $3,500 per ounce. Spot gold is now trading at $3,654.86 per ounce as of 11 am, pushing domestic prices to record highs. 

The surge in international gold prices is, in turn, driven by growing expectations of an interest rate cut by the US Federal Reserve. Weak US unemployment data has fueled speculation that the Fed may cut interest rates during its upcoming monetary policy meeting on September 16–17. Gold and interest rates generally share an inverse relationship — when interest rates fall, gold prices tend to rise, as lower returns on interest-bearing assets make gold more attractive, increasing its demand and price.

"Gold hit a fresh all-time high, supported by mounting expectations of Federal Reserve interest rate cuts through year-end. Weak US jobs report last Friday led markets to price in three rate cuts this year, including a 25 basis-point cut at the Fed's policy meeting next week," Jigar Trivedi, Senior Research Analyst at Reliance Securities, told PTI. 

Gold is considered a safe-haven asset during times of economic and geopolitical uncertainty. Investors tend to flock to the yellow metal in such periods, driving up both demand and prices. Additionally, a weakening rupee has further influenced domestic gold prices, as higher import costs have contributed to the steep price hike in India. The rupee appreciated 14 paise to 87.95 against the US dollar on Tuesday.

As a result, gold rates in Kerala- which closely follow global market trends- have gone up. The price of 18-karat gold is as high as ₹8,375 per gram. However, the rate of silver decreased by ₹30 per gram to ₹105, according to AKGSMA.