Weakening US dollar: The US dollar index has slipped by 9.3% since the beginning of this year and also reached a three-year low of 98.55. This further increased the demand for gold prices, pushing its price upwards. Central bank buying: Central banks are regularly increasing their gold reserves.5 days ago
In some cities, the spot price touched Rs 1,01,000 to create a historic record in the Indian market. Gold is up more than 25% in less than four months in 2025, and it has gained 42% over the last year, with a 10% return in April alone.
The sharp rally is being attributed to safe-haven demand, fueled by geopolitical uncertainty, central bank gold buying, and criticism of the U.S. Federal Reserve by President Donald Trump — developments that have collectively unnerved global markets.
Inflation typically drives gold prices higher because gold is often seen as a hedge against inflation. When the purchasing power of currency declines due to inflation, investors often seek safe-haven assets like gold to preserve their wealth. This increased demand for gold can lead to a rise in its price.
Here’s a more detailed explanation:
- Gold as a hedge:Gold is considered a store of value and a hedge against inflation because its price tends to rise when the value of fiat currencies (like the US dollar or Indian rupee) decreases.
- Increased demand:During periods of high inflation, investors often shift their investments from traditional assets (like stocks or bonds) to gold to protect their wealth. This increased demand for gold can drive up its price.
- Safe-haven asset:Gold is also seen as a safe-haven asset during times of economic uncertainty or instability, as it is not directly tied to the performance of the financial markets or the economy.
- Supply and demand:The price of gold is also influenced by supply and demand dynamics. If the demand for gold increases due to inflation concerns, but the supply remains relatively stable, the price of gold will likely rise.
- Currency movements:Fluctuations in currency values can also impact gold prices. If the value of the US dollar (the currency in which gold is typically priced) decreases, gold prices can rise.
