5 reasons why gold prices are rising ahead of Dhanteras 2025 and what to expect next

Gold prices have skyrocketed in 2025, delivering nearly 60% returns and leaving many investors wondering about the reasons driving the surge.

Tata Mutual Fund recently published a report highlighting the reasons behind the increasing gold price. Here's a look at five of those reasons and what to expect next:

India imports nearly 86% of gold despite the high import duty. Rupee depreciation makes the cost of imports higher, leading to an increase in gold prices in domestic markets.

"About 86% of Gold is imported into India despite high import duty. When INR falls against USD, Gold becomes costlier domestically, amplifying local demand, hence favoring rise in Gold prices," the report said.

This also has an impact on returns. For instance, as per the report, over the last 30 years, the annualised return from gold in USD terms is 7.6% while in INR (Rupee) terms, it is 11%.

The rising price of gold may soften the demand for gold jewellery. However, increasing financialisation has led to an increase in demand for digital gold investment alternatives like gold ETFs and digital gold. This strong investment demand has also pushed the prices higher.

"While Indian jewelry demand is expected to soften, investment demand (Gold ETFs, digital Gold, etc.) is rising even as rally intensifies," the report said.

Central banks in India, China, Russia, Japan and other countries have been on a gold-buying spree over the last 10 years. The gold additions by central banks have almost doubled. "Central banks across globe buying gold in last 10 years, have almost doubled in last 10 years."

For instance, central banks in Russia and India have increased their gold additions by 1.6 times in 10 years, while China has increased it by 1.3 times.

Since the start of the Russia-Ukraine conflict, the world has seen many geopolitical uncertainties, including unrest in West Asia and trade-tariff conflicts. With the arrival of Donald Trump as the US president, trade wars have intensified, pushing investors to safe-haven assets like gold.

The interest rate cut by the US Federal Reserve has triggered a tailwind for gold prices. It is expected that the US Fed may further cut rates. Such rate cuts result in dollar depreciation, which in turn supports higher prices and demand for gold.

"FED reserve cut 25 bps of rate cut on 17th Sept 2025 led to Gold price rally.The expectation is that US Fed may cut rate by 25bps again in the October meeting if the labor market continues to show weakness. US Fed will monitor the upcoming economic data before taking any further decisions as it faces risks of both higher inflation and weaker employment. Fed rate cuts generally contribute to dollar depreciation, which in turn supports higher demand and prices for Gold," the report said.

Tata Mutual Fund expects the gold prices to consolidate around a broad range of $3,500-$4000/oz over the short term, as the world digests US tariff policy changes along with heightened geopolitical risks and elevated US growth concerns.

"Investors may remain invested and look for accumulation on any decline in the prices triggered by short-term cyclical factors. We believe that the overall market environment is going to be favorable for a strategic allocation in Gold as a long-term investment in portfolio, considering it’s hedge against inflation, geo-political uncertainty and currency depreciation."

It further said that "investors may consider allocating Gold and Silver in 50:50 ratio as silver too looks attractive and Gold as a strategic asset."