Gold Price Surges 32% This Year: Reasons Behind the Bullion Boom Explained

Gold has long been considered a safe-haven investment, especially in India where cultural affinity for gold jewelry is deeply rooted. This year, gold has seen an extraordinary rise of around 32% in dollar terms, driven by multiple global and domestic factors.

One major driver has been the increased geopolitical tensions worldwide, especially after the re-election of Donald Trump and his tariff announcements, which created uncertainty and led investors toward safer assets like gold. Additionally, the weakening of the US dollar by about 11% since early this year made gold more affordable for holders of other currencies, boosting its demand.

Lower or expected lower interest rates by the US Federal Reserve have further enhanced gold's appeal. When interest rates fall, the opportunity cost of holding non-yielding gold decreases, making it more attractive. Moreover, major central banks, including India, China, and Turkey, have been increasing gold reserves, tightening supply and pushing prices higher.

Interestingly, this gold rally contrasts with positive trends in stock markets, which have seen gains in indices like Nifty and S&P 500. While stock market volatility indexes (VIX) remain near long-term averages, bond yields in Europe and Japan have risen, indicating a shift away from government bonds. This divergence hints at conflicting investor sentiments, with retail investors bullish on stocks and holding gold as a safety net, while institutional players appear more cautious.

Gold's rise is also propelled by strong domestic demand in India, particularly during wedding and festival seasons, along with currency depreciation that increases the local cost of imported gold. Although inflation and economic uncertainty are yet to reach crisis levels globally, investors are hedging against potential financial instability.

Experts remain watchful of possible market corrections but agree that gold's role as a hedge against inflation, currency risks, and geopolitical uncertainties remains strong, underpinning its impressive performance in 2025.