Gold prices touched a historic $3,200 per troy ounce for the first time on international markets this week, driven by record purchases by central banks seeking to diversify reserves away from the US dollar, persistent geopolitical uncertainty in the Middle East, and signs that major economies are losing confidence in dollar-denominated assets.
The milestone represents a 45% gain from gold’s year-ago price of $2,200 and an extraordinary 130% rise from the post-COVID low of $1,390. In Indian rupee terms, the precious metal now trades at ₹2.67 lakh per 10 grams—a level that has triggered intense debate about its impact on India’s current account and festive season jewellery demand.
Central banks globally purchased 1,200 tonnes of gold in 2025—the highest since records began—with China, India, Poland, Turkey, and the UAE among the largest buyers. China alone added 230 tonnes to its official reserves, bringing total holdings to 2,350 tonnes.
The World Gold Council attributes the surge to three converging forces: the weaponisation of the dollar through sanctions on Russia having prompted a reassessment of reserve strategy among non-Western nations; sustained US fiscal deficits above $2 trillion annually undermining confidence in Treasury yields as a safe asset; and technical momentum as the metal broke out of a long-term range.
For India—the world’s second-largest consumer of gold—the price spike presents a dilemma. High prices suppress physical demand from households (India imported 730 tonnes of gold in FY26, down from 950 tonnes the previous year), but boost the value of household savings estimated at 25,000 tonnes held in temples, households, and lockers.
The government is considering expansion of the Sovereign Gold Bond scheme to monetise idle physical gold and reduce import demand, while jewellery exporters from Surat and Thrissur report a 22% decline in export orders as global buyers baulk at elevated prices.
