Gold hits new highs again: What is driving the rally and should you invest now?

Gold prices are glittering once again, hitting fresh highs in 2025, echoing past bull runs during global crises. From the 2008 financial meltdown to the 2020 pandemic, gold has historically surged when uncertainty looms. This time, too, a mix of geopolitical tensions, central bank buying, and monetary policy shifts is powering the rally.

According to data from the World Gold Council, central banks worldwide have nearly doubled their gold holdings over the past decade, signaling confidence in the yellow metal as a global reserve asset. India, in particular, has steadily increased its reserves amid a volatile global backdrop.

Why gold is shining bright

This year, gold prices have risen more than 60%. From January 2008 to August 2011, gold prices increased by 100 percent. Similarly, between January and August 2020, gold prices rose by approximately 53 percent.

Gold recorded a fresh record high closer to $4,000 an ounce as the US government shutdown and a political crisis in France injected more uncertainty into financial markets. Bullion rose to $3,977.44 an ounce after surging 1.9% on Monday.

Another major trigger this year was the U.S. Federal Reserve’s 25-basis-point rate cut in September 2025, with another expected soon if labour market data weakens further. Lower U.S. interest rates typically lead to a weaker dollar, which supports higher gold prices as investors seek refuge in safe-haven assets.

Adding to this momentum are persistent global tensions -the Russia-Ukraine conflict, unrest in the Middle East, and uneven global growth -all pushing investors toward the perceived safety of gold.

Meanwhile, domestic factors are amplifying returns for Indian investors. With the rupee depreciating against the U.S. dollar, the price of imported gold rises, further boosting local demand and rupee-denominated returns. Over the past 30 years, gold has delivered about 11% annualised returns in rupee terms, compared to around 7.6% in dollar terms.

Investment demand picking up

While jewellery demand may soften amid high prices, investment demand through Gold ETFs and digital gold platforms is on the rise. Investors view gold not just as a hedge against inflation and currency depreciation but also as an essential portfolio diversifier.

Experts expect prices to consolidate between USD 3,500–4,000 per ounce in the short term as markets adjust to U.S. trade and growth uncertainties. However, they see the broader environment remaining favourable for gold as a strategic long-term asset. “We expect Gold prices may consolidate around a broad range of $3,500-$4000/oz over the short term, as the world digests US tariff policy changes along with heightened geopolitical risks and elevated US growth concerns. Investors may remain invested and look for accumulation on any decline in the prices triggered by short-term cyclical factors,” as per Tata Mutual Fund’s Gold and Silver Outlook Report for October 2025.

We believe that the overall market environment is going to be favorable for a strategic allocation in gold as a long-term investment in a portfolio, considering its hedge against inflation, geopolitical uncertainty, and currency depreciation. As incremental flows come to the gold and silver, investors may consider allocating gold and silver in 50: 50 ratio, as silver too looks attractive, and gold as a strategic asset, as per the report.

Gold’s latest rally is more than a festive-season spike; it reflects deep global shifts in monetary policy, currency movements, and risk sentiment. For Indian investors, it’s a reminder that gold’s value lies in stability, not speculation. Whether through ETFs, digital gold, or Sovereign Gold Bonds, maintaining a small but steady allocation to gold can act as insurance against risks.