Gold sets 10 record highs in early 2025 surge, rises nearly 10% – What’s driving the rally?

Gold price today: The price of gold has been breaking record after record this year, continuing its unwavering rally from the previous calendar year without any significant pullbacks. The yellow metal, which is seen as the safest investment, has been drawing support from all market participants, including investors, central banks, and retail investors, leading it to see one of the best record rallies after the COVID-19 pandemic.

In just under two months of the current calendar year, spot gold prices have already hit 10 record highs, with the latest peak reaching $2,886 per troy ounce in the previous trading session, bringing year-to-date (YTD) gains to 10%. In the domestic market, gold prices surged past ₹85,000 per 10 grams, setting a new record at ₹85,279 per 10 grams—an increase of nearly 11% in 2025. Meanwhile, retail prices soared to ₹86,670 on Friday.

The unstoppable run in gold prices is indicating that investors and consumers are shifting their wealth away from risky assets, such as stocks, to gold, which is considered a safe-haven asset.

Also, major central banks worldwide, especially in Asia, are continuing to diversify their foreign exchange reserves away from the U.S. dollar. China has been at the forefront of this effort, reducing its holdings of U.S. Treasuries to purchase substantial amounts of gold instead.

For centuries, gold has earned a reputation as a reliable safe-haven asset, with its inherent ability to retain or even appreciate in value making it an attractive option for investors seeking stability amid market volatility. Consequently, investors often turn to gold as a reliable investment during periods of uncertainty.

In recent years, the world has witnessed major wars involving key countries, including oil-rich nations such as Russia and Iran. At one point, reports even suggested that these conflicts could escalate into a full-blown global crisis.

The conflict between Russia and Ukraine is still ongoing, while tensions in the Middle East remain unresolved. Furthermore, the US Federal Reserve’s actions of cutting interest rates, which resulted in a softening of bond yields and consequent weakness in the US dollar, ultimately led to a 30% rally in prices in 2024, marking the best annual performance in more than a decade.

Trump’s policies boost gold’s appeal

Donald Trump’s victory in the US presidential election has added another boost to the gold rally, as investors remain cautious about his trade policies and pro-growth agenda. Fears that his policies could stoke inflationary pressures have further elevated gold’s importance as a strategic asset.

Trump’s policies are relatively expansionary in nature, focusing on promoting domestic manufacturing, fostering growth for American companies, creating job opportunities for US citizens, and strengthening the American economy.

He has indicated a preference for lowering corporate tax rates, which is expected to push the debt-to-GDP ratio higher. Additionally, his tariffs on China and other nations have raised concerns that they could weigh on the global economy, particularly outside the US.

Higher inflation and fiscal expansion are likely to lead to higher interest rates, which may put additional pressure on the US Federal Reserve, possibly prompting it to adopt a more hawkish stance. Moreover, the likelihood of Fed rate cuts in 2025 has decreased to just two, and in its recent January meeting, the central bank paused its rate cut cycle, closely monitoring the economic impact of President Donald Trump’s trade policies.

In addition to corporate tax cuts, Trump has proposed eliminating federal income tax. He has been openly critical of the modern financial system, income taxes, and the Federal Reserve, even advocating for a return to pre-1913 policies, when tariffs served as the primary revenue source for the US government.

If such a shift were to take place—though experts believe it is unlikely—gold prices could surge dramatically.

Gold tariff fears drive surge in US shipments

Donald Trump’s threat to impose a universal trade tariff of at least 10% on all imported goods, including gold, has led New York traders to demand physical delivery of gold futures contracts from London.

According to recent media reports, traders imported 393 metric tonnes of gold into the Comex commodity exchange in New York, pushing gold inventories to levels last seen at the start of the COVID-19 pandemic. The city’s gold stockpiles have now reached $82 billion.

As New York traders increasingly demand physical bullion for settlement, the waiting period to withdraw gold from the Bank of England (BoE) has surged from just a few days to as long as four weeks, Reuters reported.

The Bank of England, which holds one of the world’s largest gold reserves, is the second-largest custodian of gold globally, behind only the New York Federal Reserve. Data from the BoE shows that the bank’s gold inventory began declining between November and December, reflecting rising withdrawals.

Sources told Reuters that the minimum waiting time to withdraw gold from the Bank of England has increased to four weeks, compared to just a few days or a week previously. The Reuters report further highlighted that London bullion market players are scrambling to borrow gold from central banks amid a sharp surge in gold shipments to the United States.

The Bank of England’s vaults hold approximately 400,000 gold bars, as the bank stores gold on behalf of other central banks and certain commercial firms, according to its website.

Asian central banks take the wheel in gold reserves race

According to the World Gold Council, central banks continued to hoard gold at an eye-watering pace, with purchases exceeding 1,000 tonnes for the third consecutive year, reaching 1,044.6 tonnes in 2024. Among the major buyers was Poland, which acquired 89.54 tonnes, followed by India with 72.60 tonnes and China with 44.17 tonnes.

India has been accumulating large quantities of gold over the past three years, with its gold reserves increasing from 754 tonnes in 2021 to 876 tonnes in 2024—an addition of 122 tonnes. Currently, gold accounts for 11.35% of the total foreign exchange reserves held by the RBI.

China, the world’s largest gold producer, is also the biggest gold importer. Over the last three years, it has accumulated 331 tonnes, bringing its total gold reserves to 2,279 tonnes by the end of 2024. However, gold constitutes only 5.53% of China’s total reserves, as the majority are held in U.S. dollars.

China is the second-largest foreign holder of U.S. debt. Meanwhile, other major central banks have also been accumulating large quantities of gold in recent years, driven by concerns that the U.S. may seize and freeze their dollar-denominated assets. This fear intensified after the U.S. froze $600 billion of Russia’s dollar reserves following its invasion of Ukraine.

This move sparked concerns, particularly among emerging markets and China, as they feared similar actions could be taken against them. Consequently, they have been aggressively accumulating gold. The People’s Bank of China embarked on an 18-month gold-buying spree in 2023 and 2024.

Recently, the Trump administration imposed a 10% tariff on Chinese goods, leading China to retaliate with tariffs on various U.S. imports, which will take effect from today. Experts anticipate that China’s aggressive gold purchases will continue this year as tensions between the two global superpowers escalate, potentially pushing gold prices even higher.

Moreover, increasing gold reserves is also backed by the concept of making local currencies stronger. Economies have understood the significance of a strong currency and the inflationary hits that they face due to the dollar’s dominance.

Indian jewellery demand remains stable despite record prices

As per the latest reports from the World Gold Council (WGC), about 212,000 tonnes of gold have been mined from the Earth, with almost 50% in the form of jewellery. India and China have the largest jewellery markets, with consumers viewing gold as both a traditional asset and an investment.

The latest WGC report indicates that after posting the strongest Q3CY24 since 2015—following the sharp cut in import duty—gold jewellery demand in India lost some momentum in the final quarter.

Q4CY24 demand was 5% lower year-over-year due to the continued rise in gold prices, bringing full-year demand to 563 tonnes, a 2% YoY drop. However, this was a marginal decline despite a sharp increase in gold prices, which hit 40 record highs.

Many Indian consumers accelerated their gold jewellery purchases in late Q3CY24, as the duty cut effectively offset much of the recent price increase. Additionally, Indian gold investment remained strong in Q4CY24 at 76 tonnes, nearly matching Q3’s exceptional performance and bringing full-year demand to 239 tonnes—the highest since 2013.

Meanwhile, China’s jewellery demand stood at 479 tonnes in 2024, a 29% decline compared to 2023, impacted by weak consumer confidence, slowing income growth, and surging gold prices.

Analysts raise gold price forecasts to $3000

Global brokerage firms expect gold to continue its upward rally throughout the current year, driven by trade wars, geopolitical concerns, steady demand from central banks, and global growth uncertainties, which are expected to boost demand from exchange-traded funds (ETFs) and over the counter (OTC) investments.

UBS has recently raised its 12-month gold forecast to $3,000 per ounce after gold surpassed its long-standing prediction of $2,850 per ounce.

“While we acknowledge that the current spot price of $2,870/oz is above our fair-value estimate, gold’s enduring appeal as a store of value and hedge against uncertainty has once again proven itself,” UBS said in its note.

Citi has also revised its gold price outlook, raising its short-term target to $3,000 per ounce and increasing its average forecast for 2025 to $2,900 per ounce, up from $2,800. Goldman Sachs has also set a gold price target of $3,000 per troy ounce.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.