How gold became a hidden driver of India’s core inflation: RBI Bulletin
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Gold, which is regarded as a safe-haven asset and a hedge against rising prices, is now emerging as an unexpected driver of inflation itself.
According to the RBI’s September 2025 Bulletin, a sharp increase in gold prices was responsible for nearly 28% of the recent rise in core inflation, despite gold usually being classified as a non-core commodity in price indices. The Bulletin states, "Core inflation edged up to 4.2% in August from 4.1% in July. Rising gold prices mainly caused the inflation increase. However, inflation slowed down in other areas such as clothing and footwear, housing, health, education, and transport and communication."
However, CPI headline inflation edged up but stayed well below the target rate for the seventh consecutive month.
The RBI bulletin also noted record-high global gold prices in late August and September, when safe-haven demand surged amid heightened geopolitical tensions and US trade tariffs on key partners.
“Geopolitical tensions continued to boost gold's appeal as a safe haven, with President Trump stating that Ukraine might retake all of Russia's land and NATO telling Russia that it would employ 'all necessary military and non-military measures' to defend itself,” said Dr Renisha Chainani, Head - Research at Augmont,
However, Chainani noted, "The surge in gold prices has slowed as investors wait for the release of the US GDP data and the PCE price index report, which is the Fed's favourite inflation indicator."
Echoing similar views, Rahul Kalantri, VP of Commodities at Mehta Equities Ltd, said, "After reaching record highs, gold experienced profit taking as the U.S. dollar strengthened and bond yields increased. The dollar index exceeded the 97 mark, and a rise in the 10-year yield following stronger-than-expected U.S. new home sales data put pressure on safe-haven assets."
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Furthermore, Fed officials remain divided, with some forecasting two more rate cuts this year, others advocating a more cautious approach, and still others calling for more aggressive easing. Chair Jerome Powell also adopted a cautious tone, emphasising the challenge of balancing persistent inflation with a slowing labour market.
“Despite the pullback, market watchers believe ongoing geopolitical tensions and steady central bank demand will continue to support bullion,” said Kalantri.