Gold prices have been on fire lately, touching lifetime highs across global and domestic markets. A mix of falling trust in US assets, global trade tensions, and central bank buying has made gold the hottest safe-haven investment once again. Here’s a simple breakdown of what’s driving this historic rally.
Pressure on the US Dollar
One of the biggest reasons behind gold’s surge is the retreat of global investors from the US dollar.
The dollar fell to a three-year low after President Trump pressured the US Federal Reserve for an immediate interest rate cut. His public criticism of Fed Chair Jerome Powell last week was seen as a direct threat to the independence of the central bank, shaking investor confidence further. However, in statements since, he’s backtracked from his position and is heard saying that he has no intention to fire the chair.
The dollar index dropped sharply to 97.92, the lowest level since March 2022. Against other major currencies, the greenback suffered too, it fell to a decade low against the Swiss Franc, and the Euro strengthened to a three-year high. Even the Indian Rupee bounced back from its all-time low of 87.99 to 85 per dollar last week.
Tariffs, Trade Wars, and Fear of Recession
For years, the US dollar had been the ultimate safe-haven. But Trump’s aggressive tariff policies have changed that perception. The US imposed a baseline 10% tariff on all imports and slapped even higher tariffs on countries like China, Vietnam, Japan, India, Korea, and the European Union.
In response, China, the world’s second-largest economy, announced a retaliatory tariff on all American goods. The situation escalated, and the cumulative tariffs on Chinese products rose to 245%.
Although Trump later paused new tariffs (except on China) on April 9, the full-blown trade war had already rattled global markets. Investors started fearing a global recession, which naturally boosted the appeal of gold, traditionally seen as a safe asset during economic distress.
Huge Gains for Gold
Gold has had an incredible run this year:
It has gained over 30% so far in both domestic and overseas markets.
Over the last six years, gold has risen by more than 150% globally.
In the past twelve months alone, gold delivered an exceptional 60% return, coming close to the level of ₹1 lakh per 10 grams in Indian markets.
Clearly, gold has outperformed almost every major asset class recently.
Strong Support from ETFs and Central Banks
It’s not just retail investors driving the gold rally. Large exchange-traded funds (ETFs) backed by gold have seen heavy inflows this year. At the same time, central banks around the world have been buying gold aggressively to diversify away from the US dollar.
This institutional and official sector demand has given gold a strong foundation to continue its bullish trend.
What’s Next for Gold?
Looking ahead, the outlook for gold remains positive but there are some risks to watch out for. If trade tensions stay high and trust in US assets remains low, gold is likely to keep climbing. Increased demand from ETFs and central banks should also support prices in the short run.
However, if the US dollar starts to recover and trade disputes ease, gold could face some downward pressure. Still, major liquidation or a full crash in gold prices seems unlikely for now.
Final Thoughts
In short, a perfect storm of falling confidence in the US dollar, fears of a global recession, sweeping tariffs, and strong central bank buying has kept gold shining brighter than ever. For investors looking for safety in uncertain times, gold continues to be the go-to asset.
