The Indian rupee recently plummeted to a concerning low of 88.8 against the US dollar, driven by an extraordinary rise in gold imports. This event represented a 0.7% drop in a single trading session, marking the largest decline in eight months. Such fluctuations in the forex market have raised alarms among trading experts, who are vigilantly observing the rupee’s trajectory amidst escalating gold and silver imports. In October 2025, gold imports surged by an astonishing 200% year-over-year, significantly contributing to India’s trade deficit, which soared to an unprecedented $41.68 billion. The festive season, known for boosting gold purchases in India, further intensified the demand for precious metals, leading to a spike in gold imports not seen in recent years.
The rupee’s decline was influenced by a mix of domestic and international factors. Foreign Institutional Investor (FII) outflows, amounting to ₹240.10 crore, heavily impacted the rupee’s depreciation. Moreover, losses in the Sensex and Nifty indices intensified downward pressure on the currency. The forex market responded swiftly, with analysts forecasting that the rupee could continue to weaken, particularly if foreign capital continues to exit the Indian market. However, amid these negative developments, there was some support for the rupee. A slight decrease in crude oil prices and interventions from the Reserve Bank of India (RBI) helped cushion further losses.
The RBI is anticipated to persist in its efforts to keep the rupee from dipping below the critical 88.80 level, a historical low for the currency. For forex traders, this market intervention by the RBI is a crucial element to watch, as it will significantly influence the stabilization or further depreciation of the rupee. In October 2025, gold imports reached INR 1240.39 billion, nearly doubling from the previous year’s INR 415.15 billion. This surge is largely attributed to the festival season, with consumers purchasing considerable amounts of gold in preparation for Diwali. The rise in imports has greatly widened India’s trade deficit.
Reports indicate that Indian consumers spent INR 928.18 billion during the five-day Diwali festival, underscoring the cultural and economic importance of gold in the Indian market. This surge in imports has not only pressured the rupee but has also exposed structural vulnerabilities within India’s economy. Gold imports generally play a significant role in India’s trade imbalance, and the sharp rise in imports has sparked concerns regarding the long-term sustainability of the country’s external balance. Additionally, India experienced a remarkable 530% increase in silver imports in October 2025, further straining the trade balance. Demand for silver arises from both investment needs and industrial applications, such as solar panels and electronics.
The earlier reduction of import duties on silver has rendered it more accessible, prompting a surge in imports. The rising figures for silver imports, alongside gold, are driving India’s overall trade deficit to new heights. The combination of soaring import bills for both gold and silver, along with declining exports, has created a precarious situation for the Indian rupee. Forex markets are increasingly anxious, and analysts speculate that the rupee could breach the psychological 90-mark against the dollar unless corrective actions are implemented promptly.