Gold prices have come under pressure over the past month due to weakness in global bullion markets, while expectations of substantial dollar inflows through the Reserve Bank of India’s (RBI) FCNR(B) deposit scheme have further dampened sentiment by raising prospects of a stronger rupee, according to a report by The Hindu BusinessLine.
Price Trends
Domestic gold prices in the last month fell 6% to ₹146,344 per 10g on July 3, from ₹1,55,581 on June 4. The yellow metal is also down 14% from its record high of ₹1,69,349 recorded in March, as per data from the India Bullion and Jewellers Association (IBJA).
| Date | Price (₹ per 10g) | Change |
|---|---|---|
| March (record high) | 1,69,349 | - |
| June 4 | 1,55,581 | - |
| July 3 | 1,46,344 | -6% from June 4, -14% from record |
Analysts said the correction is primarily driven by softer global gold prices and easing geopolitical concerns, with expectations of FCNR(B)-linked dollar inflows emerging as an additional factor that could limit gains in domestic gold prices.
FCNR(B) Scheme Mechanics
The RBI recently announced a USD-INR forex swap facility for fresh FCNR(B) deposits with 3-5 year tenors until September-end, under which the central bank absorbs the entire forex hedging cost. Following the move, banks have raised FCNR(B) deposit rates to about 6-7% from 3-4% earlier, making the scheme more attractive to non-resident Indians.
While the deposit mobilisation drive is still in its early stages, banks have reported strong enquiries from NRIs, and market participants expect sizeable inflows over the coming months. NRIs have booked nearly $7 billion in FCNR(B) deposits in June alone, with overall inflows projected to reach $50 billion by October and stabilise rupee depreciation. Major banks offering these deposits include SBI, HDFC Bank, YES Bank and Axis Bank.
Analyst Commentary
Shweta Rajani, Head – Mutual Funds at Anand Rathi Wealth, said higher FCNR(B) inflows would strengthen forex reserves and support the rupee. She pointed out that when the RBI introduced a similar scheme in 2013, FCNR(B) deposits attracted about $25-30 billion, helping stabilise the currency.
“Since the announcement of the RBI measures, the rupee has appreciated from around ₹97 to ₹94.6 against the dollar, while domestic gold prices have corrected by nearly 8-9% from their June peak. Rupee appreciation has contributed to the decline in local gold prices,” she said.
According to Rajani, expectations of sustained dollar inflows have improved sentiment towards the rupee, which in turn could keep domestic gold prices under pressure even if international bullion prices remain stable. She added that gold could face further headwinds if geopolitical uncertainties continue to ease and the government rolls out a revamped Gold Monetisation Scheme. “A redesigned Gold Monetisation Scheme could mobilise idle household gold, reduce dependence on imports and lower demand for fresh gold purchases. This would ease pressure on the current account and support the rupee, creating additional downside risks for domestic gold prices.”
Manav Modi, Analyst, Precious Metal Research at Motilal Oswal Financial Services, said the dollar-rupee exchange rate has remained volatile in recent months due to tariff-related developments, geopolitical tensions in the Middle East, and RBI policy actions.
“A stronger rupee generally weighs on domestic gold prices because international bullion is priced in dollars. However, the impact of the RBI’s FCNR(B) measures is likely to play out gradually as inflows gather pace,” he said.
Going forward, market expectations of sustained FCNR(B) inflows and any resultant appreciation in the rupee could act as a cap on domestic gold prices, alongside broader trends in global bullion markets, he added.
Outlook
For commodity traders and analysts, the interplay between RBI’s forex management and gold prices will remain a key variable. With projected FCNR(B) inflows of $50 billion and a strengthening rupee, domestic gold prices may face persistent headwinds even if international bullion stabilises. The upcoming roll-out of a redesigned Gold Monetisation Scheme could further dampen demand. Key data to watch include monthly FCNR(B) inflow figures, RBI forex reserves, and the rupee-dollar exchange rate.
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