Gold shines brighter as stock markets bleed; price up over 9% in 4 months

Rs 85,114 per 10 gm (on Friday, February 28, 2025) from Rs 62,135 on February 28, 2024, per data from the Indian Bullion and Jewellers Association. Nifty has rose just under 1 per cent over the past 12 months. Gold is the most globalised commodity and the surge in its prices, too, is a global phenomenon.

Global factors

The major factors behind this jaw-dropping price rally are also global — inflationary concerns, apprehensions over international trade wars and economic fragmentation, geopolitical tensions, and stock market volatility. All these factors feed uncertainty, and as a safe-haven asset, gold shimmers best in times of uncertainty.

Put simply, a safe-haven asset is a financial instrument that is highly likely to retain its value or even appreciate in times of economic uncertainty and downturn.

“Growing concerns about US President Donald Trump’s tariff plans have continued to provide some support to the precious metal apart from softish US yields,” said Sandip Raichura, CEO of Retail Broking and Distribution, PL Broking and Distribution.

Market watchers feel that while tariff imposition will lead to inflation, gold is a known asset class that has historically preserved its value against inflation, prompting investors to move towards it. According to analysts, given the current global geopolitical and economic uncertainty, gold remains a dependable safe-haven asset. “Normally, when stocks and real estate prices fall, investors turn to gold,” said an analyst.

Heavy gold purchases by central banks of various emerging market economies, including India, China, Russia, and Turkey, over the past several months have been a key driver of prices of this most crucial reserve asset globally.

Central banks have been stepping up gold purchases primarily to diversify foreign exchange reserves and mitigate risks emanating for currency volatility. And the trend could continue in the foreseeable future fuelled by evident efforts in various parts of the world towards de-dollarisation, which essentially refers to countries lowering their reliance on the US dollar as the reserve currency and medium of exchange.

Another factor that fed into the gold price rally were the interest rate cuts in Western economies, particularly the US, last year. Gold becomes quite attractive for investors in low interest rate environments, and unsurprisingly, the precious metal has seen significant inflows over the past year. Similarly, ongoing geopolitical conflicts and a looming international trade war have added to gold’s sheen as the globally most trusted safe-haven asset.