Love gold? Who doesn’t? But the gold prices are soon going to need a ‘Guinness World Record Book’ of their own! Every single day the rising gold prices is one news headline in world’s every newspaper, and why not? In the 1970s, the gold prices used to be just Rs. 185 per 10 grams for 24K gold and in 2025 this price has crossed the Rs. 100,000 mark! Wow! That’s a huge spike. But why is the price of gold rising so much? Is it a temporary phase or are these the new normal prices? Read on to find some interesting answers.
Why is the Gold Price Increasing? Top 6 Reasons!
1. Central Banks Around the World Are Showing Their Love for Gold
A normal person buys gold in grams, maybe 40 or 60 grams could be the threshold (though at current prices, this is a dream!). But central banks don’t have this limit. They actually hold gold as a part of their reserves. The purchasing trends of central banks have a huge impact on gold.
Since the last few months, central banks around the world are buying gold in huge quantities amidst the tariff threats and also a sudden spike in geo-political tensions. Gold is like a safe haven asset for them and the international demand is steadily rising. This has led to a noticeable steady international rise in the prices of gold as well.
2. Shaky Currency Values Amidst Inflation
The purchasing power of money dropping is every person’s worst nightmare. You might have often noticed a few paisas drop in Rupees value per Dollar becomes the national headline! The same holds true for all currencies as inflation leads to a reduction in purchasing power of money. But gold gets an edge over here. It’s like an inflation hedge and holds its value comparatively really well. Being priced internationally (mostly in dollars), in the bad situation when a currency weakens, the price of gold actually rises!
In today’s world, a weaker US dollar combined with inflation rising and even parts of recession showing their effects i.e. the economic uncertainities, gold is becoming a safer investment! Thus the global demand is rising further pushing its price.
3. When Every Investment Feels Unsafe, Gold Investment Looks the Safest
Who doesn’t like watching their money grow? Over the years gold investment has proven how safe it is! Whether it was the scariest recession times or severe inflation after effects, gold rarely lost its value and thus experts (and even common people) loved investing in the most reasonably trustworthy security i.e. gold.
The same is holding true even now as an investor choice as trade uncertainty makes them shift to strong inflows in Gold ETFs amongst other gold investments.
Investor sentiment makes a big difference here and as on date there’s a bullish market for gold.
4. Gold is Rare! Supply of Gold is Lesser Than Its Demand!
The most basic principle of Economics is at work here. When the supply of any commodity is less than its demand, the price of that commodity rises! With so many reasons pushing the demand for gold up and at the same time not much happening on the front of an already limited supply of gold, the prices are skyrocketing. Gold is no different from any other commodity prices as far as the law of demand holds!
Specific to India and many other countries, there’s one special reason that further raises demand, which is the next point!
5. Festive Buying Further Pushes the Demand
Diwali, wedding season and Akshay Tritiya! The main timings when you will notice the jewelry shops overflowing with customers in India. The festive times lead to a massive push in demand of gold and thus further raise the price of gold. This is true in many other countries too.
P.S.: Diwali and wedding season is around the corner now, do you think the price of gold could cross beyond Rs.100,000 per 10 grams for 24K in India?
6. Interest Rates Impact Gold Prices Too
Opportunity cost principle at work here! It’s actually super simple. When interest rates are high, everyone invests in savings like FDs or bonds because they are safe and are offering higher returns at the same time. But as soon as the interest rates fall, gold investment becomes attractive as the returns on investment are higher! It’s a type of an inverse relationship though not a perfect one because the preference of people also plays an important role.
No wonder a sharp change in Fed Rate Cuts or Repo Rate (in India) could further affect the prices of gold too!
Inflation and Gold Price? Are They Related?
Yes! Definitely, and the above reasons too show this as well. Investment in gold shows a noticeable rise during inflation as it is considered a safe haven investment. Amidst the rising global inflation, gold is a hedge against inflation as the value of gold generally rises while the purchasing power of currencies at the same time shows a dip.
In simple words, smart investors protect their wealth by investing in gold during economic uncertainty and gold investments help with that. Though before investing they take a note of multiple factors to ensure they are making the correct decision.
Gold Price Forecast? What Do Experts Say?
The reviews are mixed! Some reports suggest that the peak of gold prices may have been achieved and it may ease up a bit by late 2025 and by 2026 could further slow down. While some studies leave the deciding factor on the market sentiment as if the gold stays on a very high threshold for a long time, the situation could be different.
All in all, as an investor one needs to take a careful decision and always take any decision with a calm mind and a thoughtful approach. Consider the market trends and also the overall economic situation always before investing.
Wow! Did you even think there could be so much going behind the gold prices rising when you tried to buy your favourite pair of gold earrings? But still am sure we need that special ‘record’ book for gold prices soon! As a consumer, do you feel buying physical gold has become useless now and rather ETFs or gold bonds are a better investment? Do share your thoughts!