Understanding Gold Prices in India — How Rates Are Determined
Gold prices in India are primarily driven by the international spot price set by the London Bullion Market Association (LBMA), converted to Indian rupees using the prevailing USD/INR exchange rate. The India Bullion and Jewellers Association (IBJA) publishes the official domestic benchmark every morning based on inputs from major bullion dealers across Mumbai, Delhi, Chennai and Kolkata.
Several factors influence daily gold rate movements. The US Federal Reserve's interest rate decisions directly impact gold as a non-yielding asset — when rates rise, gold typically faces selling pressure. Geopolitical tensions, central bank gold purchases (India's RBI has been a consistent buyer since 2017), crude oil prices, and domestic import duties all play a role. India currently levies a 6% basic customs duty plus 2.5% agriculture infrastructure cess on gold imports, making domestic prices higher than international benchmarks.
City-wise price variations exist because of local dealer premia, transportation costs, and legacy tax structures. Southern cities like Chennai and Kochi typically see slightly higher rates due to stronger jewellery demand, while Mumbai — home to the Zaveri Bazaar — often has the most competitive rates due to proximity to the import corridor.