Gold prices in India are hardly determined by jewelry demand. It is a mix
of global gold prices and the rupee value. In the above case, over the last
1 year the rupee has depreciated from Rs.68.98/$ to Rs.74.60/$. This 8%
depreciation in the rupee explains why the return on gold in India is 8%
higher than the return on global spot gold.
Hope this analysis helps you to understand why a mismatch appears between international prices of gold when compared to the domestic prices.
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