Gold price hits ₹1 lakh mark: Here are 5 key reasons behind the rally in yellow metal

Gold price today: Precious metal gold soared to hit the psychologically important level of ₹1 lakh per 10 grams in the retail market, ahead of Akshaya Tritiya, which is the auspicious day for purchasing gold in India.

On the Multi Commodity Exchange (MCX), the August delivery contract for gold surged by ₹2,048 or 2.1 per cent, reaching a new all-time high of ₹1,00,000 per 10 grams during mid-session trading on Tuesday.

According to Manav Modi, Senior Analyst, Commodity Research at Motilal Oswal Financial Services Ltd, the performance of gold in just four months of 2025 has been astounding, with the yellow metal posting gains of over ~20%, marking an all-time high on both MCX and COMEX. Gold has surprised the market as its pace and volatility this year have been sharper than most asset classes.

“We could continue to see volatility for Gold this year. Risky traders can continue to ride this rally, however, safe traders can wait for some dip to accumulate for the targets higher. We continue to recommend “buying on dips”. We feel gold could inch towards $3350-3500 and consolidate near the same. However, looking at the momentum, a rally towards $3700 over the long term can also not be ruled out. Assuming USD-INR at 85, on the domestic front, the immediate range is near ₹ 96500- 1,00,000. From a longer-term perspective, ₹1,06,000 could be possible,” said Modi.

Five key reasons behind the rally in gold prices:

1. Geopolitical tensions and uncertainties

The U.S.-China trade war has intensified, with tariffs reaching 125% on American goods and 145% on Chinese exports. This ongoing trade dispute, coupled with wider geopolitical tensions—from the Middle East to Eastern Europe—is playing a major role in heightening global economic uncertainty.

As these tensions mount, concerns over a potential global recession are growing, leading investors to flock to gold. Historically seen as a safe-haven asset during times of economic and political turmoil, gold offers protection against market volatility, inflation, and currency depreciation. This escalating uncertainty is driving up demand for gold, further boosting its price.

2. Weakened US Dollar

Gold’s recent surge is largely driven by a weakening U.S. dollar, which has enhanced the metal’s appeal among global investors. The U.S. dollar index (DXY)—which tracks the dollar against a group of major currencies—has fallen below the key 100 level. A “weak dollar” indicates a drop in the dollar’s value compared to other global currencies, making gold cheaper for holders of other currencies.

This decline in the greenback is fueled by growing concerns over a potential U.S. recession and increased market turbulence following the Trump administration’s aggressive tariff hikes.

3. Fear of Recession in US

Gold prices have jumped as fears of a possible U.S. recession grow. Goldman Sachs has increased the chances of a US recession to 45% over the next year, pointing to ongoing economic instability and trade-related pressures.

At the same time, a rise in the selling of U.S. Treasuries suggests that even government bonds are losing their safe-haven status. As bond yields climb, investors are shifting toward gold as a more reliable store of value, pushing the demand—and prices—higher.

4. ETF inflows

With geopolitical tensions on the rise and gold prices climbing, investors are increasingly gravitating towards gold ETFs. A report by ICRA Analytics highlights a significant 98.54% year-on-year surge in ETF inflows, which jumped to ₹1,979.84 crore in February 2025, up from ₹997.21 crore in the same month last year. The growing preference for Gold ETFs is driven by their liquidity, transparency, cost efficiency, and ease of trading over physical gold.

5. Gold Reserves

Amid ongoing dollar volatility, numerous central banks—particularly across Asia—have been steadily increasing their gold reserves. According to the World Gold Council (WGC), central banks collectively purchased over 1,000 tonnes of gold in 2024, marking the third consecutive year of such high levels of accumulation. The WGC’s latest Gold Demand Trends report highlights that net gold purchases by central banks reached 1,037 tonnes last year, making it one of the most significant years on record.

This robust buying trend underscores a strategic shift by nations to reduce reliance on the U.S. dollar, bolster financial resilience, and safeguard against escalating geopolitical and economic uncertainties, including growing fears of a potential U.S. recession.

(With inputs from agencies)

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.