Gold prices touched a historical high of Rs. 32,950 for 10 gm on Monday amid rising appetite from global investors and the festive winter months at home. Gold's previous high was Rs. 32,900 on September 14.
In an apparent attempt to curb speculation and hoarding of gold, the
Reserve Bank of India last week asked banks to stop lending for gold purchase of any kind.
But the spike in wedding season demand is driving the current rally in gold prices.
And what's adding fuel to the prices was the weakening rupee - closing at 55.73 to a dollar on Monday, 0.35% weaker than Friday's close of 55.53 after hitting 55.89, the weakest since September 6.
Analysts predict since India mostly imports gold, a weakening rupee - which makes all kinds of imports costlier - and high global demand will make the yellow metal more expensive.
"The current demand is not driven as much by investment purposes, as it is by purchases for weddings," said Vikrant Gugnani, CEO, broking and distribution business, Reliance Capital.
In India, the World Gold Council said, gold purchases relating to weddings typically account for 50% of families' annual jewellery demand.
With about half of the India's population being under 25 years and approximately 150 million weddings anticipated over the next decade, the WGC estimates that wedding-related purchasing will drive about 500 tonne of gold demand a year.
In Europe, the reasons behind the high gold demand are quite different. During economic downturns, such as the current one in Europe, investors typically buy up gold, as it is considered safe.
Now for European investors, gold has become cheaper because the dollar has weakened against the Euro.
"There has been a sharp rise in the demand for gold in Europe as investors are flocking to add more glitter to their investment portfolio rather than park funds in relatively more unpredictable equity markets," said Jayant Manglik, president, retail distribution, Religare Securities Ltd.