Gold prices in India remained stable on Wednesday, with the cost recorded at 8,171.77 Indian Rupees (INR) per gram, a slight increase from INR 8,170.87 on Tuesday. For tola, gold was priced at INR 95,313.88, slightly up from INR 95,303.41 the previous day.
Internationally, the US 10-year Treasury bond yield rose by six basis points, reaching 4.282%. The US real yields also increased by five-and-a-half basis points, uplifting to 1.963%, a factor that usually impacts gold prices negatively.
Gold Reserves Accumulation
The People’s Bank of China added 10 tonnes to its gold reserves in the first two months of 2025. The National Bank of Poland made a larger purchase, increasing its holdings by 29 tonnes, the highest since June 2019.
Central banks accumulated 1,136 tonnes of gold in 2022, worth approximately $70 billion, marking the highest annual purchase on record. Emerging economies, such as China, India, and Turkey, are rapidly enhancing their gold reserves.
Gold’s price is influenced by various factors, including geopolitical events and economic conditions. It typically reacts inversely to the strength of the US Dollar, meaning a weaker Dollar tends to elevate gold prices.
Gold prices in India have remained steady, with only a minor uptick in value per gram and per tola since the previous day. Such incremental movements suggest a phase of consolidation, where prices are not showing strong upward or downward momentum but are instead adjusting slightly within a narrow range.
Looking beyond India, there are movements in the bond market that could ripple through to gold prices. A six-basis-point rise in the US 10-year Treasury yield and a nearly equivalent increase in real yields suggest a tightening of financial conditions. These increases in bond yields make gold slightly less attractive, as gold itself does not offer interest—investors in the metal rely solely on price appreciation. When bond yields rise, some capital that might have flowed into gold instead turns towards interest-bearing assets, affecting demand.
Central Bank Influence On Gold
However, central banks are continuing to accumulate gold reserves, with China adding 10 tonnes and Poland acquiring almost three times that amount. The latter’s purchase is notable, being the largest since mid-2019. Moves like these underscore the broader interest from monetary authorities to hold gold as a safe asset, perhaps as a buffer against financial uncertainty. The record-breaking central bank acquisitions in 2022 highlight that institutions in emerging economies are especially keen on reinforcing their reserves, reducing reliance on other store-of-value instruments.
Gold is traditionally viewed as a hedge against both economic uncertainty and currency fluctuations. Given its inverse correlation with the US Dollar, any sustained weakening of the currency is likely to push gold prices higher. This relationship stems from purchasing power—when the Dollar declines, gold becomes relatively more affordable for holders of other currencies, stimulating demand.
For traders involved in derivatives, these factors provide multiple signals to consider. The resistance shown by gold prices amidst stronger bond yields suggests that central bank purchases are offering some support. But whether this support will be enough to counteract movements in interest rates remains to be seen. The broader economic and political context over the next few weeks will likely weigh heavily on the next directional move.
