Gold prices have rallied sharply in 2025, scaling historic highs amid a confluence of supportive factors such as central bank purchases, persistent inflationary concerns, and escalating geopolitical tensions. The precious metal briefly touched $3,500 per ounce three days ago, marking a stunning year-to-date (YTD) gain of 32%, before paring some gains to a YTD increase of 26% as of today.
The surge has been driven by a mix of factors. Central banks globally have accelerated their gold buying, partly as a hedge against a weakening dollar and inflation risks. Meanwhile, heightened global uncertainties, from trade disputes to regional conflicts, have strengthened gold’s appeal as a safe-haven asset.
However, market experts are beginning to sound a note of caution after the metal’s blistering rally.
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions, warned that “gold may be showing early indications of weakness following its tremendous surge to record highs.” While he affirmed that long-term fundamentals remain robust—”driven by central bank purchases, inflation fears, and geopolitical tensions”—he pointed out that “short-term momentum may stall.”
According to Kothari, “All of the negative news from the tariff war and forecasts of U.S. rate cuts have already been priced in, limiting any upside unless new catalysts materialize.” He added, “If economic data improves or geopolitical threats diminish, gold may suffer pressure.”
Nevertheless, he tempered the caution by stating that it is too early to proclaim a major reversal—any drop could simply be a pause in a longer-term bullish trend, and estimated that if there is no new trigger in the market for a while, prices may fall by 5-6%, reaching Rs 90,000 in the immediate term.
Tata Mutual Fund also recently highlighted the potential for short-term corrections, noting that “gold has surged more than 25% in the past six weeks, and historically, such sharp rallies tend to consolidate over a 3–5 month window.”
Sahil Shah, CIO and Fund Manager at Equirus Asset Management, echoed similar sentiments. Shah emphasized that “gold has undoubtedly been a standout performer in recent years, traditionally seen as a hedge against volatility.”
However, he pointed out a key shift in market dynamics: “Interestingly, the usual negative correlation between gold and equities has not held consistently, especially given increased central bank interest in gold as a reserve asset.”
Further explaining the macro backdrop, Shah said, “some central banks have refrained from adding USD reserves in recent times, shifting their focus toward gold.”
But with trade tensions expected to ease and negotiations likely to commence soon, he cautioned that if the US dollar regains its position as the preferred reserve currency, gold could stabilize or even retreat.
“In such a scenario, gold may underperform after a stellar run,” Shah concluded. “Thus, while it remains an important part of a diversified portfolio, significant new allocations may need to be approached cautiously.”