Gold has maintained its reputation as ‘God’s own currency’ this year. If you are wondering what’s special about gold in 2025, here it is: gold has crossed $4,000 for the first time in history. Most strikingly, the last $1,000 jump in gold prices occurred in just about 207 days.
It took nearly 15 years for the gold price to jump from $1,000 to $2,000. And then came the big spike of another $1,000, taking gold to $3,000 in just 14 months around March 14, 2025.
But why did the gold price shoot up? From where is the big demand coming in and who are the largest buyers of gold? How important has gold become for central banks, where to invest to maximise one’s gold return, how much to invest in gold and what are the risk factors? We have answered most of your gold-related questions in this edition of Gold Pulse.
We start by looking at gold’s short and long-term performance.
Gold’s Performance
The big bull run in gold began sometime in October 2022 when gold was hovering around $1,437. On October 10, the gold price was around $3,970, which is a whopping 180% jump in 3 years! In terms of annualized return or the CAGR, it’s 40% over three years. That’s super solid returns by any standard.
After rising more than 20% in 2023 and 2024, gold’s best performance has been so far in 2025. Gold is up over 53% YTD.
As of October 3, the CAGR return of gold over the last 1, 3, 5, 10 and 20 years has been 47%, 33%, 15%, 13% and 11%, respectively. Even over the long term, gold’s CAGR returns are giving strong competition to other assets.
Why gold price is increasing
Gold thrives best during economic chaos. The value of gold is the highest during a crisis. And that’s what the world started sensing in the last three years. One after another, a new set of factors emerged, giving strength to gold prices.
Geo-Politics: Back in 2022, geopolitical tensions emerged due to Russia’s invasion of Ukraine, rising tensions between China and Taiwan, and the war between Israel and Hamas, creating fear and uncertainty in the financial system. As a result, gold emerged as a preferred safe haven amidst this turmoil.
Central Banks: In response to geopolitical tensions, central banks significantly increased their gold purchases, acquiring 1,082 tonnes in 2022 and 1,037 tonnes in 2023, with a record buy of 1,180 tonnes in 2024. Comparatively, they used to do an average purchase of 500 tonnes annually.
There’s another reason related to their gold purchases. Central banks were seen moving physical gold from the Bank of England vaults, where most of them keep gold reserves, back to their domestic facilities. This move by itself brought the demand for gold into the forefront.
In 2024, India moved approximately 200 metric tons of gold from London to its Indian vault.
The Reserve Bank holds 879.98 tonnes of gold as of June 30, 2025, with about 510 metric tonnes held domestically. India still has 324 tonnes of its gold stored in the vaults of the Bank of England and the Bank for International Settlements (BIS), both based in the UK.
US Economy: The Job market in the US seems to be cracking with job layoffs increasing, employees being furloughed because of the government shutdown, filing of unemployment claims rising. The overall unemployment rate rose to 4.3% in August, bringing the focus back on the US job market.
Should these uncertainties persist and economic growth decline, the US Federal Reserve might be compelled to lower interest rates more aggressively, consequently weakening the US dollar and potentially bolstering gold prices.
Gold continues to witness a bullish undertone in 2025. The recent rise in gold prices is on the back of the US government shutdown, driving investors towards this safe-haven asset amidst concerns over an extended US shutdown.
Role of Central Banks
Global central banks are outpouring their affection for gold. For the last 3 years — 2022, 2023 and 2024 — central banks have bought over 1,000 tonnes of gold in each year. Central banks now officially hold 36,344 tonnes of gold as of May 2025, according to data from the World Gold Council. For more on central banks’ love for gold, read here.
Dollar and Gold
Another key factor is the U.S. dollar index. The weakness in the US Dollar index, which measures the currency’s strength against a basket of six other currencies, is playing a role in gold’s spectacular performance.
The dollar index is down 10% so far in 2025, pushing money out of dollar-denominated assets into gold.
But why is the dollar weakening? One of the factors is Trump’s tariff impact on global trade and global currencies and the other significant reason is the US debt burden.
Trade wars are expected to unleash currency wars in which the US dollar could be the biggest casualty. Trump’s ‘One big, beautiful bill’ is expected to increase the US debt by over $3.9 trillion. Citing worries about growing public debt and a widening budget deficit, the US credit rating had already been downgraded by Moody’s.
In 2024, the US GDP was $28.83 trillion, much less than the $35.46 trillion of debt America carries. With a debt-to-GDP ratio of 123 percent, economists feel it is a big red flag when it comes to repayment of debt by the US.
The impact of global investors losing trust in the US dollar could be huge. Global investors will reduce exposure to US bonds to shield themselves from further loss. And of course, borrowings will become costly for the US government as less demand for treasuries would lead to higher interest rates. This could put additional pressure on the dollar index and pull it down further.
De-dollarization
This impact on the dollar index is reflecting in the central bank’s forex reserves numbers. For the first time since 1996, global central banks’ foreign exchange holdings in gold now exceed their holdings of US Treasuries. Gold now ranks as the second most significant foreign exchange reserve asset held by central banks, with 20%, surpassing even the euro with 16%, after the USD, which holds 46%.
Warren Buffett and Gold
Here’s an interesting trivia. The world knows Warren Buffett as the ‘biggest and undisputed investor’ of all time. But when it comes to investing in gold, Buffett steers clear. He has zero investments in gold. Warren Buffett’s golden rule is not to invest in assets such as gold.
Dubai Gold
You would have often seen in movies and read about Indians bringing gold from Dubai. Gold in Dubai is cheaper than in India due to the absence of GST and a 5% VAT, which can be fully refunded, ensuring a tax-free shopping experience. However, there are time limits for claiming VAT refunds. Know about Dubai gold buying here.
Downside Risks
The downside risk to gold prices is increasing, as the metal is perceived to be slightly overbought, with analysts indicating that it has realized much of its upside potential. Technical analysts predict that various technical indicators suggest a likely pullback in gold prices.
Gold Predictions
Goldman Sachs analysts project that gold will reach $4,900 per ounce by the end of 2026, up from a previous estimate of $4,300. This revision is attributed to robust demand from central banks and ETF investors. A further increase of $900 would represent a 22.5% return for investors purchasing gold at current prices.
Buying Gold in Physical Form
Not China, but now India is the largest consumer of gold in the world. Indian families are estimated to hold around 24,000 tonnes of gold, exceeding the total gold holdings of global central banks.
But, remember, there’s a making charge of 5-25% at the time of buying, and also there are charges involved for converting physical jewellery to cash. Further, the price that one pays to buy jewellery varies across cities in India.
Gold price today in India is Rs 1,20,730 per ten gram 24-carat and Rs 1,10,669 for 22-carat.
Gold ETFs
A better way to own the yellow metal is to invest in paper-gold. There are Gold exchange-traded funds (ETFs) that have gold as the underlying asset and are traded on stock exchanges.
The biggest plus point of Gold ETFs compared to physical gold is the cost of ownership. Compared to jewellery’s making charges, the expense ratio in Gold ETFs is around 0.8%.
How Much to Own
Now comes the most crucial part. How much gold can one buy? Income Tax Law allows no limit on holding of gold jewellery or ornaments by anybody, provided it is acquired from explained sources of income, including inheritance.
There’s another clarification from the government – Jewellery and ornaments weighing up to 500 grams for married women, 250 grams for unmarried women, and 100 grams for men will not be seized, regardless of their match with the individual’s income records. For ‘How Much Gold Can You Keep at Home’, read here.
What to do
Gold, understandably, has run up a lot, and a price correction can be expected. Gold prices have experienced a sharp increase of 26% over the last six months.
Analysts warn of significant downside risks to gold prices, suggesting the metal may be overbought after nearing its upside potential. A sharp downturn is anticipated when it occurs.
Until the time the factors that led to the gold bull run remain relevant, a major correction may not come. Still, it is better that investors keep their gold exposure at approximately 10% of their portfolio and adjust their holdings as necessary.