Why Gold Is Cheaper In Kerala?

Gold is cheaper in Kerala than in most other Indian states, a fact that often surprises people. The primary reason for this difference is the mix of economic and cultural factors unique to the state. Even though we all know that gold rates are primarily determined by international prices, factors such as local taxes, demand fluctuations during festivals, and design preferences influence regional pricing.

For those considering a gold loan, these price variations play an important role. Since loan amounts are linked to the market value of pledged gold, knowing why gold is cheaper in Kerala helps you understand how much funding you can receive for your prized possessions.

Key Factors Affecting Gold Prices in Kerala

Here is a list of factors that determine the gold price:

Inflation

- Whenever there is an elevation in the inflation level, the gold rate increases. Gold is used as an instrument to hedge against inflation, meaning its value does not fluctuate much during inflation. So, during inflation there is more demand for gold as it is a preferred asset rather than currency. Because of high demand, the gold rate goes up.

Interest On FDs

- When interest rates on FDs rise, the gold prices fall because people invest less money in gold. On the contrary, with a decrease in the interest rates on FDs, the price of gold increases. This is because a lower interest rate is an opportunity for people to invest in gold, which generates a high demand eventually contributing to increased gold prices

Time Of Purchase

- During festivals and weddings, demand for gold increases and so does the gold rate. For example, the price of gold sees a steep increase around Onam in Kerala because gold is considered auspicious and an ideal gift to family members.

Currency

- Gold rate largely depends on the global market. Currency fluctuations are caused by various factors, including monetary policy, imports, inflation, etc. The gold rate increases when the US dollar strengthens against the Indian rupee. This is because India imports most of its gold and pays in dollars. Accordingly, when the Indian rupee falls, importing gold becomes more expensive.

Role of Import Duty and GST

- National-level duties like import tax and GST add to gold’s retail cost. Kerala benefits from established dealer networks that help reduce the overall impact of these charges.

Local Taxes and Making Charges

- Local taxes and lower making charges in Kerala play a big role in keeping gold affordable. Simpler jewellery designs translate into lower craftsmanship costs, reducing the final price.

Supply Chain Efficiencies and Direct Imports

- Kerala’s strong trade connections and direct gold imports from Gulf countries minimize middlemen and transportation costs, making gold available at competitive rates.

Gold prices, on a particular day, can be known from several financial websites. It can also be known by visiting any retail jewellery shop.

It must be remembered that gold rates at the state level differ as per the local taxes and transportation costs. One interesting fact is that gold prices in various southern cities are significantly lower than in the north and west.

In India, Kerala is one of the most significant gold markets. Presently, the gold rates in Kerala are the lowest for 22-karat and 24-karat gold. Check the difference between 22k and 24K in india

How Does the Exchange Rate Affect Gold Prices in Kerala?

The exchange rate between the Indian Rupee (INR) and the US Dollar (USD) plays a critical role in determining gold prices in Kerala. Gold is globally traded in dollars, so any depreciation in the rupee makes gold imports more expensive for Indian jewellers. Conversely, when the rupee strengthens, gold prices tend to ease slightly.

Kerala’s strong consumer demand, driven by remittances from the Gulf, often cushions short-term fluctuations. Many jewellers also maintain advance purchase contracts or hedge against currency movements, ensuring a relatively stable retail price despite global volatility. However, during periods of sharp currency depreciation or global uncertainty, Kerala’s gold rates like the rest of India can witness upward adjustments. Understanding this relationship helps both buyers and borrowers plan their purchases or gold loans more strategically.

Impact of Supply Chain and Direct Imports on Gold Prices

Kerala’s gold market enjoys a distinctive advantage due to its efficient supply chain and direct import networks. Many jewellers in the state source gold directly from Gulf countries, reducing dependency on intermediaries and avoiding extra markup costs. The proximity to major ports like Kochi further enhances logistical efficiency, minimizing transportation and handling expenses.

These supply efficiencies ensure a steady flow of gold into the market, even during high-demand seasons like weddings and Onam. The streamlined process allows jewellers to offer competitive rates, making gold cheaper in Kerala compared to many other states. Additionally, established relationships between local traders and international suppliers enhance price transparency and stability. This well-structured gold ecosystem not only benefits buyers but also increases the valuation potential for those seeking gold loans at favourable terms.

The Unique Gold Market of Kerala

Kerala's affinity for gold is not just a trend but an integral part of its societal fabric. The state exhibits a pronounced fondness for gold, evident in its substantial contribution to India's gold demand. Monthly per-person gold expenses in Kerala's rural areas average at Rs 208.55 and Rs 189.95 in urban settings. Festivities and traditional ceremonies further amplify this penchant for gold, making it an indispensable part of celebratory customs.

But why does gold seem more accessible in this region? Kerala's gold rates are primarily shaped by the All Kerala Gold and Silver Merchants Association, responsible for determining daily gold prices based on numerous influential factors. The pivotal driver behind Kerala's comparatively affordable gold prices hinges on the intricate dynamics between demand and supply.

Role of Taxes, Import Duties, and GST in Kerala Gold Pricing

Gold has always been one of the most sought-after metals by people in the state of Kerala. It is used during many occasions, primarily in wedding ceremonies, for gifting purposes, engagement ceremonies and even naming ceremonies.

As of July 5th 2024, the 1 gram gold rate in Kerala is Rs. 6,700 for 22 karat gold, while the rate of 24 karat gold is Rs. 7,309 per gram. 24 karat gold is also referred to as 999 gold in Kerala.

What's the gold price movements in Kerala over the years?

Over the years, the gold price has fluctuated like any other state in India. Here’s a look at the gold price movements in the past.

Comparison of Gold Prices in Kerala vs Other Indian States

Cultural Predispositions

Purity and Design Preferences:

In Kerala, gold holds deep cultural and emotional value, often associated with prosperity and celebration. The state shows a strong preference for 24-karat gold, particularly during auspicious festivals like Onam and Vishu, when demand surges dramatically. While much of India opts for 22-karat gold due to its durability, Keralites value the purity and symbolic significance of higher-karat gold.

Moreover, Kerala’s jewellery designs are traditionally simple and elegant, focusing on purity over heavy craftsmanship. This simplicity lowers making charges, further reducing the overall cost of gold ornaments compared to other states.

Kerala's Distinct Gold Market Tapestry

The phenomenon of lower gold prices in Kerala is not merely economic, it’s cultural, emotional, and deeply traditional. The combination of steady demand, cultural inclination toward high-purity gold, and simpler designs has created a unique gold market ecosystem.

Kerala’s robust remittance-driven economy and efficient local gold trade also support a consistent supply at competitive prices. Together, these factors make the state one of the most favourable places to purchase or pledge gold.

And if you ever face a financial crunch, you don’t have to sell your jewellery. Instead, you can pledge your gold with a trusted lender like IIFL Finance.

IIFL Finance offers a quick, transparent, and secure gold loan process, ensuring the best value for your gold at competitive interest rates. Your jewellery is safely stored in vaults and returned intact once you repay the loan, making it a smart way to meet your urgent financial needs without parting with your prized possessions.

How Is The Gold Rate In Kerala Calculated?

The gold rate in Kerala is determined by the All Kerala Gold and Silver Association on a daily basis. It is a group of gold merchants that decides the gold rate keeping in mind all the above factors.

The most important factor shaping the gold rate in Kerala is the international gold price. An increase in the global gold price also raises the gold rate in Kerala. In the last few years, the US dollar has been gaining strength against the Indian rupee due to which the gold rates in Kerala have increased.

In Kerala, the love for the yellow metal is evident in every Malayalee’s life. According to Commodity online, a leading business journal, Kerala accounts for over 20% of India’s gold consumption. As the gold rates are the cheapest in Kerala, it is the best state for buying gold, both for consumption and investment.

Conclusion

Investment in gold can be in the form of gold jewellery as well as coins, biscuits and bars. It can also be done through gold mutual funds or through gold exchange-traded funds. But before buying gold one must ensure its weight and purity and avoid purchasing gold that is not BISmark-certified.

Gold rates change every day. So, to get the best deal you must check the highest and lowest gold prices before you decide to sell or buy gold.

Also, if you are facing a financial crunch, you need not sell your gold jewellery. Instead, you can pledge the gold jewellery with a reputed lender such as IIFL Finance and take out a gold loan.

IIFL Finance provides a fast and 100% transparent process for gold loans to meet your urgent financial needs. It provides the best value for your gold assets and offers competitive interest rates. Moreover, IIFL Finance keeps the ornaments locked in secure vaults and returns the pledged gold safely to the borrower after the loan is repaid.