New Delhi, June 18 A Crisil report on Wednesday suggested that similar to food and fuel categories, which are excluded from the core inflation index, gold too may be kept out while assessing the true impact of domestic demand pressures on prices, particularly during periods of high global economic uncertainty when gold prices tend to spike.
The report found that inflation in gold, despite a lighter weight (2.3 per cent) than other items in the core inflation index, contributed 17 per cent of the rise in core inflation over the 12 months ending May 2025.
“During fiscal 2025, gold inflation climbed to 24.7 per cent on average against 15.1 per cent in fiscal 2024, while the other categories that bucked the trend recorded a combined inflation rate of only 2.4 per cent,” the report argued.
Between May 2024 and May 2025, core CPI inflation climbed 111 bps to 4.2 per cent. While prices in most sub-categories within core inflation declined, five bucked the trend and saw inflation rise: mobile tariffs, travel and transport, toiletries, silver, and gold.
Among these, gold saw the sharpest increase in inflation. Global prices surged as heightened global economic uncertainty drove safe-haven investment demand for the metal across the world.
“Although gold carries a small weight in the headline CPI (1.1 per cent of the total index), including it in the core CPI calculation distorts domestic price signals, particularly during times of global economic uncertainty,” the Crisil report explained.
Rising core inflation is typically said to signal underlying domestic demand pressures on prices. However, as gold prices are largely influenced by global factors — especially safe-haven investment demand — these do not necessarily reflect domestic consumption trends, it added.
During uncertain global times, such as the present, gold prices can skew the trajectory of core inflation and should be excluded from the analysis.
“For instance, if gold prices had followed their usual trend, core inflation would have been 3.4 per cent in May instead of the reported 4.2 per cent. Keeping out gold shows that the core CPI rose only 65 basis points (bps) over the 12 months ending May 2025 as against the 111 bps increase in the commonly used core measure,” the report stressed.
Prominent central banks also include gold in their core inflation index, but its weight is significantly lower than in India, limiting its impact on their core inflation measure. In India, a higher weight for gold is possibly due to its higher share in consumption compared with other countries.
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