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Gold has always been more than just a shiny metal. In India, it is stitched into our culture; handed down in families, bought during festivals, pledged in tough times, and celebrated at weddings. For the global economy, however, gold has often been seen as old-fashioned. Governments and big investors have traditionally preferred bonds, stocks, and currencies that pay interest or dividends. But 2025 has reminded everyone that gold is not just sentimental jewellery. It is also a serious financial asset, and right now it is outperforming the world’s most established safe-haven investment: US government bonds.
For decades, American Treasuries have been the cornerstone of global reserves. Central banks from Europe to Asia piled them up because they were considered risk-free, easy to trade, and backed by the full authority of the US government. If you wanted security, you bought Treasuries. If you wanted liquidity, you bought Treasuries. Gold, by comparison, was like a keepsake—nice to have, but not essential. That hierarchy has just flipped. For the first time since the mid-1990s, the combined value of gold sitting in central bank vaults is now higher than the combined value of Treasuries they hold.
Put simply, the gold pile has overtaken the bond pile. This single shift says a lot about how the world views money today.
Part of the explanation is straightforward: prices.
Gold has rallied hard, rising from about $2,000 per ounce in 2024 to above $3,500 this year. Central banks have been among the biggest buyers, adding more than 1,400 tonnes to their reserves in just the past 18 months. Even if they had bought nothing new, the bars already in their vaults would be worth dramatically more. On the other side of the equation, Treasuries are no longer the bargain they once were.
Yes, they pay around 4% interest, but when inflation eats up 3% or more each year, the real return shrinks to almost nothing. And the US dollar itself has been losing ground. Since 2020, its purchasing power has eroded by nearly 20-25%. That means the same one-dollar note buys less chocolate, less petrol, less of everything.
This erosion is not a new problem.
Since the US cut its link to gold in 1971, the dollar has lost about 96% of its purchasing power. Economists describe this as debasement: the slow dilution of money’s value when supply grows faster than output. Unless yields on Treasuries rise above this pace of erosion, investors are effectively lending to the US at a loss. Overlay that with a national debt of $37 trillion, and the confidence that Treasuries are rock-solid looks shakier than it did a generation ago.
There is also the political dimension. In 2022, the West froze Russia’s reserves overnight in response to its invasion of Ukraine. That episode rattled other central banks, who realised that their holdings of US bonds and dollars were only as safe as the politics behind them. Gold, by contrast, cannot be blocked or cancelled. If you hold it in your own vault, you own it outright. That sense of sovereignty is part of its appeal.
India has already taken note. The Reserve Bank of India recently brought back over 100 tonnes of gold from overseas storage to vaults at home. Gold now makes up about 12% of India’s reserves, reflecting not just its rising price, but a deliberate strategy to strengthen control over reserve assets.
The logic is simple: in a world where sanctions, tariffs, and trade wars can upend the rules overnight, it makes sense to hold an insurance policy you can touch and count.
This global rebalancing has coincided with local factors that are making Indian gold prices soar to record highs. On September 3, 24-carat gold crossed ₹1,06,199 per 10 grams, an eleventh straight day of gains. Silver too touched ₹1,22,000 per kilogram. Behind these numbers are three main drivers.
The first is America’s trade war. Tariffs announced under President Trump have unsettled markets, with courts ruling parts of them illegal but leaving them in place until the Supreme Court decides. The second is monetary policy. Trump has openly pushed the Federal Reserve to cut rates and even hinted at removing its Chair, Jerome Powell. Markets now expect a rate cut at the Fed’s September meeting, with a strong probability of at least 25 basis points.
Lower rates reduce the opportunity cost of holding gold, since investors are giving up less interest income. And the third is currency weakness. The dollar has been sliding, while the rupee has breached the 88 mark against it for the first time. Because gold is priced in dollars, a weak rupee magnifies the cost of importing it into India. Add festive demand ahead of Ganesh Chaturthi, Navratri, and Diwali, and you have a perfect recipe for higher domestic prices.
So will this rally last or fade away? Analysts are leaning towards the first option. ICICI Bank’s economic research team projects that Indian prices will hold between ₹99,500 and ₹1,10,000 per 10 grams for the rest of 2025 and then rise further, possibly reaching up to ₹1,25,000 by mid-2026. Their forecast assumes the rupee stabilises between 87 and 89 to the dollar. Global prices, they suggest, could average $3,400–3,600 per ounce this year and move towards $3,800 in the first half of 2026. Other experts are even more bullish. Some see gold touching $3,700 per ounce—roughly ₹1.10 lakh per 10 grams—within weeks, and even testing $4,000 by year-end if uncertainty remains high.
For households, that means jewellery shopping will only get more expensive this festive season. For investors, it means existing holdings in sovereign gold bonds, ETFs, or coins have already gained, and may continue to provide a cushion against inflation and currency weakness. For the RBI and other central banks, it validates their strategy of keeping more gold at home and less reliance on assets that can be politically constrained.
The paradox here is striking. Central banks are the very institutions that issue currency and underwrite government debt. Yet they are simultaneously hedging their own system with gold. That tells us something important: no matter how sophisticated financial markets become, trust in gold resurfaces whenever inflation bites, debt piles up, or politics intrudes.
As 2025 unfolds, gold is not just a chart topping commodity. It is at the heart of a larger story; about how the global financial order is adjusting to inflation, about how politics is reshaping what counts as safe, and about how ordinary households in India will continue to see their festival budgets shift. Whether you treat it as an heirloom, a hedge, or a habit, the resurgence of gold shows that sometimes the oldest assets have the strongest staying power.
And if even central bankers—the ultimate custodians of money—prefer to keep it close, it may be worth asking what role it should play in our own financial strategies too.
FAQs
Why is gold outperforming US government bonds in 2025?
Gold is outperforming Treasuries because its price has surged above $3,500 per ounce, while US bonds offer low real returns after inflation. Rising debt, dollar weakness, and political risks have made gold a stronger safe-haven choice.
What caused central banks to buy more gold recently?
Central banks have bought over 1,400 tonnes of gold in the past 18 months to diversify reserves, protect against sanctions, and hedge against inflation. They see gold as a safer, sovereign-controlled asset compared to dollar-based assets.
Why did India move 100 tonnes of gold back home?
The Reserve Bank of India shifted gold from overseas storage to local vaults to strengthen direct control over its reserves. Gold now makes up around 12% of India’s forex reserves, reflecting its strategic importance.
How high are gold prices in India right now?
On September 3, 2025, 24-carat gold crossed ₹1,06,199 per 10 grams, while silver hit ₹1,22,000 per kilogram. This marked the eleventh straight day of gains in domestic bullion prices.
What is driving Indian gold prices to record highs?
Three main factors: US trade war tariffs, expectations of a Federal Reserve rate cut, and a weaker rupee crossing 88 per dollar. Seasonal festive demand is adding further upward pressure.
Will gold prices in India keep rising in 2025–26?
Yes, most forecasts expect stability around ₹99,500–1,10,000 per 10 grams in 2025, with potential to touch ₹1,25,000 by mid-2026 if global uncertainty continues.
How does inflation affect US Treasuries and gold?
Treasuries lose value when inflation eats into their fixed returns. Gold, by contrast, holds purchasing power and often rises in times of inflation, making it a better hedge.
Why do sanctions make gold more attractive?
After the West froze Russia’s reserves in 2022, central banks realised dollar assets could be politically blocked. Gold stored at home cannot be frozen, making it a safer option.
What does rising gold mean for Indian households?
Households will face higher jewellery costs this festive season, but investors in gold bonds, ETFs, or coins will see their holdings appreciate. Gold also provides a hedge against rupee depreciation.
What role should gold play in personal investment strategies?
Gold can act as a hedge against inflation, currency weakness, and geopolitical risks. While it may not generate income like stocks or bonds, holding 10–15% of a portfolio in gold adds stability.
