Why Gold Is the New Geopolitical Currency
From Russia to RBI: How nations are hedging chaos with bullion—and what it signals for markets.
You might remember that I’d covered gold here on 1st Jan 2025 — since then the yellow metal is up 14% (prescient? you decide!). In this week’s deep-dive, I want to explore with you what’s actually driving this massive rally in gold, and whether it’s likely to hold.
From what I’ve been tracking, several structural factors are at play. Central banks, particularly China’s, have been steadily increasing their gold reserves, signaling a strategic shift in how nations are thinking about financial security and currency risk.
At the same time, ongoing geopolitical uncertainty and volatile markets have made gold more attractive as a hedge, and with interest rates staying low, the usual concern about gold’s lack of yield has become less relevant.
We might also be seeing the impact closer to home. In India, where gold plays both an emotional and economic role, the domestic prices have hit ₹89,850 per 10 grams. This gold rally is already affecting how households, investors, and even policymakers are approaching gold.
In this deep dive, I’ll walk you through the data behind these trends, break down who’s driving demand, what this means for India, and what you might want to watch for as gold and silver navigate the next one to two years.
The important thing to note, at the outset, is that the ongoing gold rally is grounded in a set of very real, fundamental shifts. Let’s explore them below!
Several fundamental factors underpinned this sharp rise in gold prices in late 2024 and early 2025:
Central Bank Buying Spree (De-dollarization and Diversification):
Central banks around the globe have been voracious buyers of gold, providing a strong sustained demand. In 2022, central bank gold purchases hit a record 1,136 tonnes, which was the highest annual buying on record since 1950.
This trend continued into 2023 and 2024, with 2024 marking the third consecutive year of global central banks buying gold of 1,000+ tonnes. See table below.