Existing investors should book partial profits, new ones should enter gradually

Gold prices have soared to record highs in 2025 - recently breaching $4,379.44 per ounce globally and ₹1.30 lakh per 10 grams in India. This meteoric rise (about 63 per cent gain in 2025 in India) has made gold one of the year's best-performing assets. The question before Indian retail investors is: Should they buy or sell gold at these levels?

- By: Sudipta Mitu

Factors that drove the rally

Global drivers: A mix of macroeconomic and geopolitical factors has propelled gold upward. Investors worldwide have flocked to it as a safe haven amid geopolitical tensions (such as conflicts and trade wars).

A weakening U.S. dollar has boosted international prices. The US government shutdown and fiscal uncertainties have also enhanced gold's appeal.

Additionally, record central bank buying has provided a powerful tailwind. Nations like China, Turkey and even the Reserve Bank of India have been accumulating gold to diversify away from the U.S. dollar, spurred by the de-dollarization trend and the fear of sanctions.

Domestic drivers: In India, local factors have amplified the global trend. A depreciating Indian rupee (it has depreciated by about 4.56 per cent against the US dollar over the past 12 months) has made imported gold costlier in rupee terms, contributing to record high prices domestically.

Seasonal demand during festivals and weddings has been robust, pushing domestic prices even higher.

Potential upside factors ahead

Several positive factors could continue to support gold prices. One major factor is the outlook for U.S. monetary policy. If the U.S. Federal Reserve shifts to cutting interest rates (as many expect in the coming year), it would likely weaken the dollar and lower bond yields, which historically benefits gold.

Ongoing geopolitical uncertainties – from war tensions to global economic fragility – are another upside catalyst, as they sustain demand for gold as a hedge against crises.

The structural trend of central banks diversifying reserves into gold is also expected to persist. Many central banks remain underweight in gold and are continuing to buy.

In India, strong demand should endure with festive and wedding seasons each year providing a boost.