Gold : The Only Certain in Uncertainty

Since the start of 2025, gold prices have increased by 25%. This is equivalent to its full-year price increase last year. The pace and quantum of return have caught many off guard. The question is whether the current prices will stay, rise, or fall. 

Since gold has many categories of buyers, and they all have their reasons, finding one was not the problem. Given the shift in global certainty level in the last five years, it has found more buyers every fall. 

The main and large buyers in the last few years have been central banks. For them, it still is only 5-10% of the total reserve. The leading nations have been China, India, Turkey and Poland, especially after Russia Russia-Ukrainian war the buying has been aggressive. 

Another main reason for this accelerated pricing is the allocation by large institutional and high-net-worth individuals. This category was present but for many years had a restricted view and allocation in it. Given the volatility spikes since last August, the allocation by them has increased due to risk and return management. 

These along with some other positive momentum are supporting the price falls as buyers increase. As every asset has there is a risk to this price as well. The hint might be in large withdrawals from Bank of England vault reserves. 

Currently, the USA is facing a large fiscal deficit and given the recent bill, it is unlikely to reduce at a fast pace to meet the administration target of 3% by 2028. The fallback might be selling the gold in its reserve as the law allows it to do so for national purposes. This if and when announced would shift the demand-supply dynamics of the asset and hence impact the price.