Gold Prices Fall in India as Rupee Surges on US Trade Relief

The report titled "When the dollar turns on itself" states that while gold gained on the international market, local prices in India fell because the Indian rupee became much stronger after a trade agreement with the US.

"Gold gained another 5% in February to reach US$5,222/oz; it is now up 20% y-t-d. Performance in other currencies, however, was mixed: a sharp Indian rupee appreciation following tariff relief with the US, saw local prices drop 3.5%."

The report highlighted that this disconnect between rising global gold values and falling local prices is driven by currency shifts.

For the investors, the "February return" for gold in Indian rupee terms was -3.5 per cent, making it one of the only regions, alongside China, to see a negative return during the month.

"Currency strength saw local gold prices drop in India and China; elsewhere, gold returns were positive," the report added.

As of late February, the local price stood at "1,58,585" for 10g.

Looking at the broader picture, the report suggests that the US dollar may continue to weaken in the medium-term, which generally supports gold. It mentions that "The downward trend in the US dollar index (DXY) is likely to resume post this near-term bounce and is, in our view, a key positive force for gold prices going forward."

However, the report also highlights that the recent "sharp Indian rupee appreciation" was a primary driver for the local price dip.

While the global year-to-date return for gold is "up 20%," the recent strength of the rupee has provided a different experience for those buying in local markets.

- ANI