Gold prices in India have crossed the historic ₹1,00,000 mark per 10 grams for the first time, driven by a potent mix of global demand, geopolitical tensions, and robust central bank buying. On Friday, August gold futures on the Multi Commodity Exchange (MCX) surged nearly 2% to a record ₹1,00,403 per 10 grams, settling around ₹1,00,145. Globally, spot gold climbed 1.3% to $3,428.28 per ounce, while US gold futures hit $3,449.60, marking their highest levels since early May. This article explores the key drivers behind gold’s unprecedented rally and why it remains a top choice for investors.
Geopolitical Tensions Fuel Safe-Haven Demand
Rising geopolitical risks have significantly boosted gold’s appeal as a safe-haven asset. The recent escalation in the Middle East, particularly Israel’s airstrikes on Iran’s nuclear facilities, has heightened fears of a broader conflict. This follows the 2023 Hamas assault on Israel, which triggered a prolonged military response. These events, combined with ongoing global uncertainties like the Russia-Ukraine conflict, have solidified gold’s role as a hedge against volatility.
“Geopolitical stress, whether from the Russia-Ukraine war, Gaza-Israel tensions, or the Iran episode, consistently underscores gold’s reliability as a safe-haven,” said Abhishek Jain, a Delhi-based gold trader. Additionally, concerns over US trade policies under President Donald Trump, including threats of tariffs to force trade concessions, have reignited fears of a global trade war. Despite a possible 90-day tariff pause hinted at by US Treasury Secretary Scott Bessent, market uncertainty persists, further supporting gold’s rally.
Since February 2022, when the Russia-Ukraine conflict began, gold has surged nearly 92% in international markets, recently touching $3,445 per ounce—close to its all-time high of $3,500.
Central Banks Bolster Gold Demand
Central banks, particularly in emerging markets, have been a major force behind gold’s rise. Since the COVID-19 pandemic, institutions like the Reserve Bank of India (RBI) have aggressively increased their gold reserves to hedge against inflation, currency depreciation, and geopolitical risks. The RBI, a consistent buyer since December 2017, intensified its purchases post the Russia-Ukraine war, making it one of the leading central bank gold buyers globally, according to a Punjab National Bank research note.
“Central bank purchases have tightened global supply and supported prices. This is a strategic, long-term shift, not short-term opportunism,” Jain noted. The World Gold Council highlights that central bank demand has been a key pillar propping up gold prices, especially during economic and currency fluctuations.
Inflation and Economic Uncertainty
Gold’s safe-haven appeal was further reinforced during the 2022–23 global inflation surge. In the US, inflation hit a 40-year high of 9.1% in June 2022, prompting the Federal Reserve to raise interest rates 11 times, pushing the federal funds rate to 5.25%–5.50% by July 2023. While rising rates typically reduce gold’s attractiveness due to higher opportunity costs, persistent macroeconomic uncertainty, volatile currency markets, and fears of stagflation have sustained demand.
“Under normal circumstances, rate hikes would dampen gold demand, but these are extraordinary times. Gold is being repositioned as a strategic hedge,” Jain explained. This structural shift underscores gold’s growing role as a long-term investment asset.
What’s Next for Gold Prices?
Looking ahead, analysts expect gold prices to remain elevated due to unresolved geopolitical tensions and continued central bank buying. Uncertainties surrounding US trade policies and unpredictable global diplomacy could further drive market volatility, bolstering gold’s appeal.
“Gold has evolved from a mere hedge to a strategic asset class,” said Jain. “Unless global tensions cool significantly, this rally is far from over.” With its strong fundamentals and safe-haven status, gold continues to shine as a reliable investment in uncertain times.
For investors seeking to capitalize on this trend, staying informed about geopolitical developments and central bank policies will be crucial. As gold continues its upward trajectory, it remains a cornerstone for portfolios aiming to navigate global uncertainties.
