Gold is on a record-breaking spree – even by its safe haven standards! Gold prices have been rising to new lifetime highs both in the domestic and international markets – smashing records with a bull run not seen in several years.Gold prices surged beyond $4,000 per ounce in international markets this week, reaching this unprecedented level amid growing worries about the United States economy and the US government shutdown, which propelled the ongoing upward trend.The precious metal’s price increase also coincided with apprehensions that the technology sector-driven surge, which pushed several stock markets to all-time peaks, might have become excessive, sparking discussions about potential market overvaluation.
Gold has broken through multiple records
Central banks around the world are increasing the percentage of gold reserves in their overall foreign exchange reserves. Why are gold prices rising so rapidly? Are investors worried about the future of the dollar? Experts weigh in:
Gold’s staggering rally in numbers
- Gold, which was below $2,000 two years ago, has smashed records by climbing above $4,000. The precious metal has risen more than 50% this year amidst concerns regarding trade, the autonomy of the US Federal Reserve and American fiscal health.
- According to Bloomberg, the precious metal is heading towards its strongest yearly gains since the 1970s, an era characterised by swift inflation and the abandonment of the gold standard, which resulted in the metal’s value multiplying 15-fold!
- The 2025 surge in gold prices stands out as it has occurred without a financial crisis. The 52% increase in futures prices this year is set to exceed similar increases seen during the first year of the Covid-19 pandemic and the 2007-09 economic downturn, second only to the inflationary period of 1979.
- Exchange-traded funds have seen substantial investment activity, with gold-backed ETFs experiencing their most significant monthly influx in over three years during September.
- In the Indian market, gold prices have crossed the Rs 1.2 lakh mark on the MCX futures. Overall
MCX Gold has given a return of 60.41% on YTD basis also supported by weaker Indian currency pairs which had depreciated by 3.71 % against the dollar.
What’s causing the gold price rally?
According to Wall Street Journal, investors concerned about the stability of major currencies including the dollar are increasingly shifting their investments towards alternative assets such as gold and bitcoin, creating a notable trend that financial analysts refer to as the debasement trade.Experts in the markets have interpreted this investment pattern as an indication that the substantial rise in government borrowing and persistent elevated inflation levels are creating uncertainty regarding the stability of currencies that form the foundation of international financial markets.As per a Bloomberg analysis, gold prices typically surge during periods of economic and political uncertainty. The precious metal surpassed $1,000 per ounce following the global financial crisis, reached $2,000 during the Covid pandemic, and exceeded $3,000 as global markets reacted to the Trump administration’s tariff policies in March.The metal has now exceeded $4,000, coinciding with various factors, including US President Donald Trump’s confrontation with the Federal Reserve, specifically his threats towards Chair Jerome Powell and attempts to remove Governor Lisa Cook, presenting an unprecedented challenge to the central bank’s independence.Central banks around the world are also buying gold in a big way, adding to the rally. Since the global financial crisis, central banks have transformed from net sellers to net buyers of gold.
Central banks love gold
Purchase rates doubled after the 2022 freezing of Russia’s foreign-exchange reserves by the US and allies, following Russia’s war with Ukraine. This action prompted many central banks to seek portfolio diversification, whilst inflation concerns and potential changes in US treatment of foreign creditors enhanced gold’s attractiveness to monetary authorities.Rising geopolitical conflicts have also driven increased interest in safe-haven investments this year, whilst central banks maintain their substantial gold purchasing activities.The surge in gold prices has intensified as investors look to safeguard against possible market disruptions amid the governmental budget standoff in Washington. Additionally, the Federal Reserve’s shift towards monetary easing has benefited gold, an asset that generates no interest.
What’s the gold price outlook?
Goldman Sachs has increased its gold price projection for December 2026 to $4,900 per ounce, revised upwards from their previous estimate of $4,300.Gold represents a valuable asset independent of institutional confidence, as communicated by the bank to its customers.While Goldman’s analysts and various research institutions anticipate continued price increases driven by central-bank acquisitions, Bank of America’s historical analysis reveals that since the 1860s, extended periods of gold price appreciation have invariably been succeeded by significant declines.Ray Dalio, the billionaire investor, expressed on Tuesday that gold serves as a more reliable safe-haven asset compared to the US dollar, drawing parallels between the current rally and the 1970s market conditions. These observations followed Citadel’s Ken Griffin’s comments linking gold’s price surge to concerns about American currency stability.
Gold has soared this year as greenback languished
“Gold is a very excellent diversifier of the portfolio,” Dalio stated whilst speaking with Bloomberg’s Lisa Abramowicz at the Greenwich Economic Forum in Connecticut. “So if you were to look at just from the strategic asset allocation mix perspective, you would probably have as the optimal mix something like 15% of your portfolio in gold.”“Gold breaking $4,000 isn’t just about fear — it’s about reallocation,” said Charu Chanana, a strategist at Saxo Capital Markets Pte according to a Bloomberg report. “With economic data on pause and rate cuts on the horizon, real yields are easing, while AI-heavy equities look stretched. Central banks built the base for this rally, but retail and ETFs are now driving the next leg.”“We expect gold to reach a cyclical peak when there is greatest market concern about the outlook for Fed independence,” Macquarie Bank Ltd. analysts wrote in a September 30 note. “In the event, however, that a compromised Fed were to make clear policy errors, gold’s performance should of course be even stronger.”
Gold has outperformed stocks this century
Maneesh Sharma, AVP – Commodities & Currencies, Anand Rathi Shares and Stock Brokers tells TOI, “US Treasury yields remain on the back foot across the curve as investors slightly increase bets on faster Fed easing in the months ahead, with 111 basis points (bps) of interest rate cuts priced in by December 2026. The CME Fed Watch Tool indicates markets are pricing a 94.6% chance that the Fed will lower rates by 25 bps at the October 29-30 FOMC meeting.”“With the US shutdown still yet to be resolved, prices are likely to continue upward trajectory where we expect a level of $ 4,105 – 4,150 per oz likely to be tested in spot markets in the short term perspective of 1 – 2 weeks. This could be followed by consolidative moves towards the start of November month. finally translating to an likely upside peak up to Rs. 1,23,800 – 1,24,500 per 10 gm. on MCX futures contract. Any resolution towards the US Shutdown process over the weekend could again bring back profit booking moves in next week,” he adds.(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
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