Gold's Performance in 2025
Gold has emerged as the best-performing asset in 2025, achieving a remarkable 28% increase in dollar terms since the beginning of the year, reaching record highs.
- In India, the price surpassed ₹1 lakh per 10 grams.
- Price volatility has been significant, linked to US tariff policy fluctuations.
Factors Influencing Gold Prices
- US Tariff Policy: Fluctuations in US tariff policy have caused price swings.
- Macroeconomic Uncertainties: Higher global inflation likelihood has contributed to price increases.
- Hedge Against Inflation: Gold is traditionally hoarded as a safeguard against inflation and macroeconomic instability.
- Central Bank Purchases: Many central banks have increased their gold holdings, driven by uncertainties.
Relationship with US Dollar and Treasury Yields
- A weaker dollar typically results in increased gold prices.
- Rising US Treasury yields coupled with a weakening dollar could signal greater inflation and economic slowdown, potentially boosting gold demand.
Potential US Gold Reserve Revaluation
- The US holds about 8,150 metric tonnes of gold.
- Current US valuation at $42 per troy ounce, with market price at $3,340, suggesting a significant revaluation impact.
India's Gold Reserves and Market
- India's government reserves are around 876 tonnes, with household holdings at 25,000 tonnes.
- The thriving jewellery industry must manage inventories cautiously amid price volatility.
- The gold loan market saw a growth of 76% in 2024-25 and is anticipated to reach ₹10 trillion in the current year.
Regulatory Measures and Oversight
- The Reserve Bank of India has proposed regulations to curb malpractices like "evergreening" gold loans.
- Central bank oversight is crucial given the volatile global gold prices.