Gold Prices: Recent Rise, Underlying Drivers and What to Expect

In 2025, gold has once again captured attention — its price has been climbing vigorously in recent weeks, breaking prior records in many markets. In India, for instance, MCX gold futures recently touched a new high of ₹1,20,900 per 10 grams. Globally, spot prices have pushed past $3,900–$4,000 per ounce in some quotes. 

What’s driving this surge? And is it sustainable? Here’s a deep dive.

Why Have Gold Prices Been Rising Recently?

There is no single “smoking gun” behind gold’s recent rally. Rather, a convergence of macro, geopolitical, and market dynamics has pushed demand and prices higher. Some of the key drivers:

1. Rising economic and geopolitical uncertainty

Investors tend to flock to gold in times of uncertainty. The world is currently grappling with volatile trade policies, geopolitical tensions, pressures on fiscal frameworks in many large economies, and concerns about central bank independence. As uncertainty rises, gold’s role as a “safe haven” becomes more attractive.

2. Weakness (or pressures) in the U.S. dollar and real yields

Gold is priced in U.S. dollars. When the dollar weakens, gold becomes cheaper for buyers holding other currencies, boosting global demand.
Also critical is the concept of real interest rates (nominal interest rates adjusted for inflation). When real yields are low or negative, the opportunity cost of holding non-yielding assets like gold is lower, making gold more appealing.

3. Expectations of monetary easing / rate cuts

In many markets, the expectation (or hope) that central banks—especially the U.S. Federal Reserve—will begin cutting or easing interest rates has buoyed gold. Lower rates tend to dampen bond yields, making gold comparatively more attractive.

4. Aggressive central bank buying

Central banks themselves have been net buyers of gold in recent years, adding strong structural demand. This shift is partly driven by diversification away from U.S. Treasury and dollar exposures.

5. Strong flows into gold-backed ETFs / investor demand

Retail and institutional flows into gold ETFs (exchange-traded funds) and other investment vehicles have been robust. Such inflows provide liquidity and amplify upward momentum. 

6. Inflation pressures and worries of currency debasement

Persistent inflation (or inflation expectations) erodes purchasing power of fiat currency. Gold is often seen as a hedge or store of value in such an environment.

7. Local factors (for India / other markets)

In India specifically, some additional factors accentuate the rise:

• A weakening rupee (versus dollar) increases the local gold cost.

• Import duty, taxes, and logistics costs can push domestic gold prices higher.

• Seasonal and festival demand (weddings, Diwali, etc.) often bolster demand in India’s gold market.

Thus, the recent gold rally is not driven by one dominant factor, but rather by the alignment of many favorable (for gold) forces.

Factors That Influence Gold Prices — A Framework

To understand gold’s future, it helps to think systematically about the levers:

1. Interest rates / real yields – The higher the real yields on safe government bonds, the more attractive bond investments become versus gold, suppressing gold demand; conversely, low or negative real yields favor gold.

2. Inflation / inflation expectations – Because gold is a non-yielding asset, inflation erodes fiat currency value, making gold more attractive as a store of value.

3. Currency strength (particularly U.S. dollar) – As gold is globally dollar-priced, movements in the dollar affect cross-currency demand.

4. Central bank policies & reserve diversification – Central bank buying or selling of gold directly affects medium- to long-term demand.

5. Investor / speculative flows – Retail and institutional inflows (via ETFs, funds) can accelerate trends.

6. Supply & mining dynamics – While gold supply is relatively stable and slow to respond, any disruptions in mining output, cost pressures, or regulatory changes can affect costs and supply.

7. Geopolitical / macro uncertainty – Crises, policy shocks, or systemic risks tend to push capital into gold as safe haven.

8. Liquidity and market sentiment / momentum – Market psychology, technical trends, and momentum play extra roles in short- to medium-term moves.

Each of these factors can reinforce or offset the others. For example, a rising yield environment might hurt gold, but if inflation expectations also surge, the net effect might still be positive for gold.

Outlook: What Could Gold Prices Do Over the Next Year?

Before proceeding, a caveat: this is purely suggestive, not a guaranteed forecast. Many variables will play out, and unexpected shocks (positive or negative) can derail any prediction.

That said, based on current trends, here is a reasoned scenario for the next 12 months:

From published forecasts:

• J.P. Morgan Research sees prices averaging about US$3,675/oz by Q4 2025 and moving toward US$4,000 by mid-2026.

• Goldman Sachs has boosted its target for December 2026 to US$4,900/oz, citing structural demand from central banks.

• Deutsche Bank has raised its 2026 forecast to US$4,000/oz.

• Some analysts point to seasonal or technical resistance that may temper gains beyond mid-2026. 

• On the flip side, some more conservative forecasts suggest gold may remain range-bound or even correct if yields move sharply higher. 

Given all that, a plausible working “target band” for the next 12 months (if conditions remain broadly favorable to gold) might be US$4,200 to US$5,000/oz (with bouts of volatility). In rupee or local currency, depending on exchange rate moves, the equivalent could be more dramatic.

If the trend intensifies, gold might well surprise on the upside; if macro conditions reverse (rising real yields, strong equities, inflation retreat), gold could see corrections.

What Should MSMEs, Investors and Businesses Watch?

• Real interest rate trajectory: Closely monitor central bank policies and real yields (nominal minus inflation).

• Inflation data: Inflation surprises (especially upward) could further fuel gold demand.

• Currency / exchange rate movements: In India, rupee depreciation or volatility amplifies gold price changes locally.

• Central bank buying / reserve policies: Any announcements of new reserve strategies or gold purchases by central banks are potential catalysts.

• ETF/investment flows: Net inflows or outflows from major gold ETFs can amplify momentum.

• Geopolitical or macro shocks: Unexpected crises or policy surprises can send safe-haven flows rapidly.

• Technical / momentum signals: Many traders will watch breakouts, trend lines, overbought/oversold zones for entry/exit signals.

For SMEs dealing in jewellery, metals, imports, or those using gold as reference (e.g. in contracts, SMEs in financial adjacent sectors), the advice is: build flexibility, avoid overexposure at peaks, and monitor macro signals carefully.

Conclusion

Gold’s rise in recent weeks is no coincidence — it reflects a synergy of macro stress, investor flows, central bank behavior, inflation concerns, and shifting sentiment. While predicting the exact peak or trajectory is perilous, the current backdrop still leans in favor of gold.

If the global monetary environment becomes more benign (with rate cuts), and inflation remains sticky, gold’s path upward may not yet be exhausted. But the margin for error is narrowing, and any reversal in yields or investor risk appetite could lead to corrections.

For SMEStreet readers, the key takeaway is this: gold is once again an asset to watch closely—not just for speculation, but as a signal of where macro and financial markets are under strain.