Gold has had a phenomenal run for the last three years. Most investors, including market analysts, were caught off guard by the continuous record highs in gold prices.
After rising more than 20% in 2023 and 2024, gold is already up over 27% so far in 2025. Gold reached its all-time high of $3,500 on April 22, and it took just under 30 months for the price to double.
Many say nothing is startling in gold’s spectacular performance. Gold is shining because the ‘world is burning’.
But, as of now, most of the geopolitical factors that contributed to the gold price surge appear to be fading away.
Yes, the impact of the Russia-Ukraine conflict or the Israel-Iran war on the world economy seems relatively calm. Also, the trade wars among nations, especially the US and China, due to Trump tariffs, are no longer threatening the world economy.
Overall, the geo-political situation seems to be all under control. However, the news is that central banks continue to buy gold, even though the overall momentum of buying may have decreased.
The impact: Gold as a safe-haven asset is losing its shine, with prices remaining in a close trading zone of around $3,350 for over two months now.
The New Trigger for Gold
Of late, the US dollar (USD) has been touted as the next big reason for the gold bull run to continue.
But, you may ask, what has the dollar got to do with gold prices? Well, the US Dollar plays a big role in determining the price of gold. Let’s break it down.
Gold has an inverse relationship with the dollar. But wait. How would the dollar’s relative strength be determined? After all, there are hundreds of currencies, just as many countries.
Here comes the importance of the dollar index, which measures the currency’s strength against a basket of six other currencies.
When the dollar index strengthens, the gold price falls, and vice versa. That’s what historical data shows.
Let’s look at a real example to know how currency weakens or strengthens. Assuming the USD-INR exchange rate today is Rs 85 to a dollar. If the exchange rate goes to Rs 90, it means the INR has weakened, USD has strengthened. Similarly, if the exchange rate goes to Rs 80,
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