Gold shines brighter, touches all-time high: What is driving the surge, is the rally sustainable?

Gold prices have been hitting all-time highs recently with rates crossing ₹90,000 per 10 gm mark, reflecting sustained demand fuelled by domestic and global factors.

As per the All India Sarafa Association, gold rates climbed by ₹500 to touch its lifetime high of ₹91,250 per 10 gm (99.9% purity) in the national capital on Tuesday, March 18 on the back of sustained buying by traders amid firm global trends, a PTI report said.

On the previous day, March 17, the yellow metal jumped to ₹90,750 per 10 gm (24K, 99.9% purity) after its last record of ₹89,450 per 10 gm hit on February 20.

Spot gold on Tuesday also hit a fresh high of $3,028.49 per ounce, while Comex gold futures touched a record peak of $3,037.26 per ounce, the PTI report added. Spot gold prices have jumped from $2,000 to $3,000 in just nearly 210 days.

What are the major factors driving the prices?

Gold is one of the most valuable commodities with incomparable significance in the global economy. The consistent rise in its prices has only added to its appeal. Investors have time and again found refuge in the yellow metal when other investments have become too risky, making it a safe haven.

Global uncertainties, geopolitical tensions and trade tariffs, among other things, have been fuelling gold prices. Moreover, rising inflation, fluctuating currencies and buying by the central bank have also been driving the surge in gold prices, according to Sachin Jain, Regional CEO, India, World Gold Council.

“Gold hitting the US $3,000 mark is a clear testament to its enduring role as a safe haven asset. The rise is majorly driven by a confluence of global economic uncertainties, geopolitical tensions, trade tariffs and significant shifts in central bank behaviour. To add to this, concerns over rising inflation and shifting currency values, coupled with central banks actively increasing their gold reserves, are providing strong support to gold's pricing,” Jain stated.

Gold’s position as a safe haven has been consistently solidified with the metal’s exponential returns to investors amidst stock market volatility, trade war fears, growing inflation and increasing geopolitical tensions.

Is the rally sustainable?

In 2024, gold gave investors a stellar return of more than 20%. The ongoing economic slowdown, rising inflation and Trump’s tariffs, among other factors, have led to an upward trajectory for gold. However, gold as an investment has a volatile nature as well, and as there have been long periods in history when gold prices haven’t changed significantly, gold’s outlook for the future remains uncertain.

“Global uncertainty around US trade tariffs, geopolitical tensions and central bank buying continue to be key drivers of the recent gold price rally. However, the sustainability majorly depends on the continuation of these factors and also continued interest in gold buying, especially from Western investors,” Jain said, maintaining that even with gold’s safe-haven nature, it is subject to volatility in the markets.

Will RBI policies impact gold prices?

The Reserve Bank of India (RBI) can impact gold’s trajectory in several ways. When the apex bank raises interest rates, it can lead to a decrease in demand for gold as other investments become more attractive. Opposingly, when the central bank cuts the repo rate, demand for gold might increase along with its prices. Furthermore, a reduced repo rate can fuel inflation and result in a weaker rupee, which can trigger a price increase for the yellow metal.

The RBI announced a 25 basis points (bps) rate cut in the previous month, making borrowing cheaper and increasing the money supply in the economy. This could have potentially made gold more attractive and led to a surge in its demand. As per experts, RBI’s policies have a crucial effect on India’s gold market, and the government also plays an important role by maintaining a stable import duty.

Commenting on this, Jain said: “India’s central bank plays a key role in shaping the domestic gold market of India through its policy measures. Meanwhile, the government keeps the import duty (tax on imported gold) stable, narrowing the gap between domestic and international gold prices and boosting investor confidence. While these measures create local market stability and promote price convergence, gold’s overall trajectory is also largely influenced by broader global economic and geopolitical factors.”

Gold ETFs

Gold ETFs have also seen notable growth, with net inflows into the yellow metal ETFs jumping 216% to ₹9,225 crore in 2024 from ₹2,919 crore in 2023, as per data by the Association of Mutual Funds in India (AMFI). The net inflows stood at ₹460 crore in 2022. Additionally, net inflows in gold ETFs climbed to ₹3,751.4 crore in January 2025 from ₹640.16 crore in December 2024, recording a growth of 486%.