Gold Rush

Gold, till recently dismissed as a relic of the past by those who believed in the supremacy of fiat money and equities, has once again become the metal of the moment. Ahead of the festive Diwali season, the prices have breached an eye-watering Rs. 1.3 lakh per 10 grams of 24-karat gold, up from Rs. 78,610 last year. That is a year-on-year rise of 65 percent, enough to make even the most ardent buyers blanch. Yet, jewellers remain surprisingly upbeat. Rising household liquidity, aided by GST simplification, government salary revisions and moderating inflation, has kept spending resilient. Many are recycling old gold, opting for lightweight pieces, or trading down to 18-karat ornaments.

The surge has taken the gold’s total market capitalisation to a staggering $30 trillion. It marks the steepest rally since 2008, telling a story not merely of greed, but of fear.

The trigger this time has come from across the Atlantic. Two American regional lenders disclosed loan irregularities this week, reviving memories of subprime rot and rattling investors already jittery about the US economy’s credit quality. Coupled with a fresh round of US–China trade tensions, the result has been a flight to safety on part of investors.

The metal’s run has been breathtaking. Over the past three years, prices have soared by more than 165 percent, rising from about $1,649 an ounce in 2022 to over $4,380 this week. In just the first ten months of 2025, more than half that gain has been logged. Few assets have offered such a return; fewer still have done so while signalling deep unease about the global order.

Here lies a paradox. The Federal Reserve’s expected rate cuts that were once meant to reassure markets are instead stoking gold’s ascent. Lower rates make non-yielding assets like gold more attractive. There is rife speculation that all is not well with America’s economic engine. When faith in paper weakens, faith in metal hardens.

That faith extends far beyond Wall Street. Central banks led by China, India and Turkey, have been among the biggest buyers of bullion, seeking to hedge against dollar weakness and diversify reserves. Exchange-traded funds have also seen strong inflows as institutional investors reposition for an era of geopolitical fragmentation, fiscal excess and a fraying post-war order.

Still, not all that glitters is stable. The current frenzy resembles the exuberance of past bubbles, when investors mistook refuge for reward. Gold is, by its nature, a hedge against uncertainty. Its price rises when confidence falls. A sustained rally therefore implies enduring pessimism about global growth, trade and governance. That may comfort bullion dealers, but it bodes ill for policymakers.

For the world’s central banks, gold’s rise is both symptom and warning. The more investors seek safety in metal, the more they confirm their loss of faith in money. The question, then, is not how high gold can go, but how low global confidence has fallen.