Gold's dip a mere blip in glittering rally hinting at global monetary shift

Despite its retreat, the price of gold has defied the usual headwinds. The surge looks more structural than cyclical.

- Vikram Khanna

It has been a banner year for gold bugs. Despite a 5 per cent correction on Oct 21, the yellow metal has been the best-performing asset class of 2025 so far. On Oct 20, its price crossed US$4,300 an ounce, an increase of around 60 per cent since the start of the year, outpacing all of the "Magnificent Seven" stocks that have driven the 15 per cent rally in the S&P 500. It has thrashed bonds, beaten Bitcoin, and even the world's best-performing stock markets.

Gold's current bull market, which dates back to 2022, has defied the usual cyclical headwinds that hold back its price. It's famous for being an inflation hedge, typically rising when inflation goes up and then falling when inflation subsides.

For instance, its price jumped during the 1970s, when US inflation hit double digits following the oil shock of 1973-74, ending the decade at around US$850 per ounce, a more than fivefold increase compared with in 1974.

But during the 1980s, when the US Federal Reserve under the chairmanship of Mr Paul Volcker raised interest rates to more than 20 per cent and crushed inflation, the price of gold went down sharply, all the way through the 1990s, to around US$250 per ounce in 1999.

But this pattern has not repeated itself in recent years. In fact, none of the usual headwinds has managed to slow gold's remarkable ascent.

OLD PATTERNS AREN'T PLAYING OUT

After peaking at just over 9 per cent in June 2022, US inflation has steadily trended down to less than 3 per cent in August 2025. But instead of going down in tandem during 2022-25 as one might expect, the price of gold has soared.

The gold price has also historically moved inversely with real interest rates. When rates go up, gold tends to go down, which makes intuitive sense - higher real interest rates offer higher yields, whereas gold yields nothing.