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Gold has breached the $4,000-an-ounce mark --a line once thought distant even by the most bullish traders.
What is driving this gold rush? The yellow metal’s ascent reflects an undercurrent of anxiety running through central banks, sovereign wealth funds, and now, private investors. When governments start buying gold at record prices, it’s not optimism at play — it’s insurance.
Gold has broken free from the confines of its earlier range of $3,200–3,450 per ounce, climbing 14 percent since late August and a staggering 47 per cent year-to-date.
The last time we saw this kind of coordinated accumulation by central banks was during moments of deep global churn — the collapse of Bretton Woods, the oil shocks of the 1970s, and the 2008 financial crisis. My colleague Shishir Asthana elaborates here on the reasons behind the current gold rally.
For months, analysts tried to pin the surge on rate-cut bets and safe-haven flows. But that’s only the surface. Beneath it lies a deeper, slower-moving story — the redefinition of what qualifies as a “reserve asset”. Gold, the oldest form of money, is quietly reclaiming that role as paper promises wobble under the weight of global debt, sanctions, and policy fatigue.
According to a Goldman Sachs research report, the breakout has been powered by three conviction buyers — Western ETFs, central banks, and, to a smaller degree, speculative traders.
The investment bank notes that ETF inflows and renewed central bank purchases after the summer lull, rather than short-term speculation, are driving the rally. Speculative positions account for barely a fraction of the move, suggesting the rally is being fuelled by real money.
The reserves race
Central banks across Asia, the Middle-East and parts of Europe have been adding tonnes of gold to their reserves. Even as prices soared, buying did not stop — an indication that the motivation isn’t profit, but protection.
In 2025, central banks stepped up purchases again after a brief summer pause, reinforcing the notion that gold has become a strategic asset, not a speculative one.
Yet not everyone is rushing in. India’s Reserve Bank has been cautious, adding just under four tonnes between January and August 2025, a sharp fall from over 45 tonnes in the same period last year.
It has also slowed the repatriation of gold held abroad — perhaps to maintain operational flexibility or to avoid spooking markets. Still, the rising price has inflated the value of India’s reserves, now worth over Rs 4.3 lakh crore — up 57 percent in a year. That’s a windfall on paper, but it also comes with a policy dilemma.
What does it mean for India?
For India, $4,000 gold is a mixed blessing. The RBI’s reserve value swells, but the import bill gets heavier. Every $100 rise in gold adds strain to the current account. Policymakers must tread a fine line between discouraging imports and ensuring domestic confidence isn’t shaken by curbs.
There’s also a strategic risk. If emerging peers like China, Turkey or the Gulf states keep bolstering their gold holdings while India holds back, we risk losing ground in the quiet race for monetary autonomy. Gold still serves as an anchor in times when global credit systems wobble — and that anchor is being steadily pulled away from the dollar.
In other words, gold is no longer just a hedge against inflation — it’s a hedge against uncertainty. And when the buyers are central banks themselves, it tells you exactly who’s losing faith.
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