Why gold is on fire right now? Is it Trump factor, Putin’s war or something local in India? Explained

For the first time in history, gold prices in India have shot past the Rs1 lakh per 10 gm mark. The premium 24-karat gold is now priced at Rs 1,00,000 per 10 gm in Mumbai, while 22-karat gold hovers around Rs91,600. This milestone is being mirrored globally, with prices breaching $3,400 per ounce.

The sharp rally in gold prices is being driven by a complex mix of global economic uncertainty, political developments in the United States, and the ever-reliable perception of gold as a “safe-haven” investment during financial turmoil.

How Trump’s attack on the US Fed changed everything?

One of the key triggers behind this spike is the recent announcement by US President Donald Trump that he plans to overhaul the United States Federal Reserve. Trump has expressed frustration with the current Federal Reserve Chairman, Jerome Powell, criticising him for not lowering interest rates despite the ongoing slide in the US dollar and rising inflation.

Trump’s aggressive stance has raised serious concerns about the independence of the Federal Reserve, an institution meant to function autonomously from political influence. These concerns have deeply unsettled investors, leading to increased volatility in global markets. The uncertainty surrounding US monetary policy has further devalued the dollar and sent investors scurrying towards gold as a safer investment alternative.

Weakening US Dollar makes gold even more attractive

Gold prices tend to rise when the US dollar weakens, and that is exactly what is happening. On April 21, the US dollar fell to its lowest level since 2022. The ICE US Dollar Index, which measures the dollar against a basket of global currencies, dropped to 97.92. A weaker dollar makes gold cheaper for investors who use other currencies, thereby boosting demand for the precious metal and contributing to the upward price momentum.

The New York gold price is currently around $3,486.85 per troy ounce. This is a significant increase, given that gold has already gained nearly 59 per cent since March 2024.

India’s love affair with gold

India is the second-largest gold market in the world, ranking just behind China. In 2024, the country’s gold demand stood at 802.8 tonnes, marking a significant increase from previous years. The total value of this demand reached Rs 5.15 lakh crore, reflecting the rising importance of gold in the Indian economy.

Gold holds a unique cultural significance in India, where it is widely regarded as a symbol of wealth, prosperity, and social status. It plays an essential role in weddings, religious festivals and is often passed down through generations as family heirlooms.

Beyond its cultural value, gold also serves a practical economic purpose. Many Indians use their gold holdings as a financial safety net, pledging jewellery and coins to raise funds during emergencies, for medical expenses, or to support educational and business needs.

Why gold always finds a way to rise?

1. Dollar-gold inverse relationship

A falling dollar often boosts gold because it makes the metal cheaper for non-dollar investors.

2. Inflation hedge

Gold retains value even when inflation eats away at paper currencies.

3. Geopolitical tension

Investors flee to gold during wars, political instability, or financial crises.

4. Low interest rates

When central banks cut rates, gold becomes more attractive as it doesn’t yield interest — but offers safety.

5. Supply constraints + central bank demand

Central banks across the world — particularly those of China and Russia — have been buying large quantities of gold. This strong demand from institutional investors and central banks has added considerable momentum to the rally.

With central banks hoarding gold, supply struggles to match surging demand.

PNN

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