Gold Price Surge Driving Core Inflation: Crisil

Crisil has reported that rising gold prices, driven by global economic uncertainty, are significantly contributing to India’s core inflation—despite headline CPI inflation dropping to a 75-month low of 2.8% in May 2025. Core inflation rose to 4.2%, up 111 basis points year-on-year.

Key Highlights

• Gold’s Disproportionate Impact
  • Gold contributed 17% of the core inflation increase over May 2024–May 2025.
  • Despite a 2.3% weight in the core CPI basket, gold inflation averaged 24.7% in FY25, up from 15.1% in FY24.
  • Crisil found gold price volatility (standard deviation: 12) exceeds that of fuel (4.5) and food (3.6).
• Other Contributors to Core Inflation
  • Apart from gold, inflation rose in mobile tariffs, travel & transport, toiletries, and silver.
  • Most other sub-categories saw a decline in price pressures.
• Crisil’s Recommendation
  • Exclude gold from core inflation, as is done for food and fuel.
  • Gold’s volatility, largely driven by global investor demand, distorts true signals of domestic demand-led inflation.

Global Comparison

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• Advanced economies like the U.S., U.K., Japan, and EU include gold in core inflation with less than 1% weight, minimizing its inflationary impact.

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