Synopsis
Central Bank Buying and Geopolitical Tensions Drive Surge
Gold has surged to historic highs in 2025, reaching $3,500 per ounce in a brief price spike, as central banks worldwide accelerate their purchases of the precious metal, driven by a mix of concerns over inflation, currency fluctuations, and escalating global tensions.
The rally has been led by strong demand from central banks, with multiple countries, including the US, China, and Japan, adding to their gold reserves as a hedge against economic uncertainties. The surge has been particularly pronounced in the Indian market, where gold prices have soared by 25% in the past six weeks, fueled by the government’s decision to cut import duties on gold.
Short-Term Corrections Loom as Analysts Warn of Momentum Stagnation
Despite the impressive gains, analysts are now sounding a note of caution, warning that the metal’s long-term fundamentals may face short-term headwinds.
“Gold may be showing early indications of weakness following its tremendous surge to record highs.”
—Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions
Kothari notes that the recent price spike has already been driven by anticipation of US rate cuts and tariff war concerns, which have largely been priced into the market. As such, any further upside will likely require new catalysts to materialize.
If economic data improves or geopolitical threats subside, gold may suffer pressure. However, Kothari tempered this by stating that it is too early to proclaim a major reversal, and any correction could simply be a pause in a longer-term bullish trend.
Global Economic Dynamics Shift
Analysts are highlighting a key shift in global economic dynamics, with some central banks choosing to shift their focus toward gold as a reserve asset, rather than US dollars.
“Interestingly, the usual negative correlation between gold and equities has not held consistently, especially given increased central bank interest in gold as a reserve asset,”
—Sahil Shah, CIO and Fund Manager at Equirus Asset Management
Key Takeaways
• Gold prices have surged by 26% in 2025, driven by central bank buying and geopolitical tensions. • Analysts warn of short-term corrections, citing concerns over economic data and geopolitical threats. • The recent surge has been fueled by anticipation of US rate cuts and tariff war concerns, which have largely been priced into the market. • Any correction could be a pause in a longer-term bullish trend, with gold remaining an attractive hedge against global uncertainty.
