Gold prices continued to hold record gatherings, with spot rates climbing to an all-time high of $3,300 an ounce. From domestically, MCX gold futures soared to historic highs of Rs 95,000 per 10 grams, reflecting the strength of the global uptrend. 24K gold trades at Rs 95,170 per 10g, while in the domestic market, 22k Gold trades at Rs 87,190 per 10g.
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In a major revision, Goldman Sachs raised its gold price forecast to $3,700 an ounce by the end of 2025, as demand from investors continued to continue central bank purchases. Investment banks also marked a potentially high-risk situation where gold could hit $4,500 per ounce if global macroeconomic situation deteriorates drastically.
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As geopolitical risks escalate and economic indicators remain volatile, gold once again consolidates its position as a preferred safe haven asset. A careful study of the five key factors driving the current gold price rise.
Why is gold price rising? 5 main driving forces behind surges
Gold prices surged to fresh highs this week, driven by global economic uncertainty, U.S.-China trade tensions, increased risk of U.S. recession, weakening U.S. dollar, strong central banks have stepped up gold reserves and the boost from exchange-traded trade funds (ETFs) that will flow into the amounts of exchange-traded trade funds (ETFs).
1. Weakening the dollar increases gold demand
Gold’s latest rally is closely linked to the dollar’s recent weakness, which makes precious metals more attractive to global investors. The US dollar index (DXY) (DXY) (DXY) measures the greenness of a basket of major currencies, which is designated below 100 points. “Weak US dollar” refers to a decrease in the value of the US dollar relative to other global currencies.
The decline tends toward this decline following the Trump administration’s aggressive tariff action. It is worth noting that tariffs on Chinese imported goods have been raised to 125%, prompting Beijing to take immediate retaliation measures. This trade conflict has given investors confidence and pushed them toward sheltered payment assets such as gold.
Impact on Indian gold prices
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In India, where nearly 85% of gold is imported, gold rates are significantly affected by the dollar movement.
The relationship between gold and the US dollar is inversely proportional:
- When the dollar weakens, international gold becomes more expensive in terms of rupee, thus increasing domestic gold prices.
- When the dollar strengthens, the price of gold in India often eases
2. Central Bank upgrades gold reserves
Several central banks have been increasing their gold reserves amid the fluctuations in the US dollar, especially the Asian central banks. According to the World Gold Council (WGC), the central bank has added 1,000 tons of gold in a row for the third consecutive year. The latest news from WGC Gold demand trends The central bank was a net buyer of 1,037 tons of gold in 2024, one of the strongest years on record, the report shows.
This positive accumulation reflects the efforts of countries to diversify from the US dollar, improve financial stability and hedge against geopolitical and economic risks. This trend reflects an increasing focus on the U.S. recession.
One of the Reserve Bank of India in India
The Reserve Bank of India (RBI) has taken a significant move in the gold bar market, adding 72.6 tons of gold to its reserves in 2024. This left India behind Poland and Türkiye only in that year. India’s total gold holdings are now over 800 tons, reflecting the Reserve Bank of India’s continued focus on diversifying its foreign exchange reserves.
Why do central banks buy gold? Large-scale gold acquisitions purchased by central banks can tighten supply and help diversify from the dollar, hedge inflation, and enhance reserve stability amid global economic uncertainty
3. The looming fear of our recession
Gold prices soared due to concerns about the potential recession in the U.S. recession and the Fed’s recent reduction in interest rates. (Note: When interest rates drop, gold shines). Goldman Sachs has raised the possibility of a U.S. recession to 45% citing continued economic uncertainty and trade tensions.
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Additionally, the increase in sales of Treasury bonds suggests that even U.S. bonds may no longer be a safe haven for investors. As bond yields rise, investors use gold as an alternative, driving demand and thus increasing gold prices.
4. ETF inflows increase
Investors flock to gold ETFs amid geopolitical tensions and rising gold prices. According to a report by ICRA Analytics (ICRA Analytics), ETF inflows increased by 98.54%, up year-on-year, reaching Rs 197.984 crore in February 2025 out of Rs 99721 crore in the same period last year. Investors are increasingly turning to gold ETFs compared to physical gold because they provide liquidity, transparency, cost-effectiveness and ease of trading.
5. Geopolitical tensions and economic uncertainty
United States – China’s trade war has escalated, with U.S. goods facing 125% tariffs and 145% tariffs on Chinese goods. From the Middle East to Eastern Europe, this trade conflict and broader geopolitical concerns have greatly promoted global economic uncertainty.
As tensions escalate, fear of a global recession has intensified, prompting investors to seek refuge in gold. During times of economic instability and political turmoil, gold has long been seen as a safe haven asset, helping to protect wealth of potential market downturns, inflation and currency devaluation. This growing uncertainty is increasing demand for gold to surge fuel, thereby raising prices.
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in conclusion
All in all, the rise in gold prices can be attributed to a combination of key factors: the weakening of the dollar, the increase in central banks’ gold reserves, fear of the U.S. recession, massive ETF inflows, and the increase in geopolitical tensions. These factors strengthen gold’s position as a safe haven asset as a remain uncertain as the global economic outlook remains uncertain. Investors not only protect gold to protect their wealth from potential market volatility, but also hedge against risks posed by trade conflicts, inflation and geopolitical instability. Gold rally is expected to continue due to demand and the broader macroeconomic environment.
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Source: https://dinhtienhoang.edu.vn
Category: Optical Illusion