In a world increasingly defined by volatility—economic, geopolitical, and financial—gold has quietly reclaimed its historic status as a store of value and a hedge against uncertainty. Over the past year, the yellow metal has outperformed equities, oil, and most risk assets, signalling a broader reordering of global asset preferences. Central banks, retail investors, and policymakers are united in their newfound enthusiasm for the yellow metal—not merely as an inflation hedge but as a strategic tool in a shifting global financial architecture.
India’s central bank is no exception. The Reserve Bank of India added 57.49 tonnes of gold to its reserves in the fiscal year ending March 2025, taking the total to 879.59 tonnes. This significant uptick in the yellow metal holdings means the precious metal now comprises 11.7% of India’s foreign exchange reserves, up from just 9.3% six months ago. In parallel, the RBI has repatriated 88.6 tonnes of gold from the Bank of England and the Bank for International Settlements, a move that reflects growing concerns about asset sovereignty in an age where financial sanctions and geopolitical friction are the norm.
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Why this pivot to gold? The answer lies in the changing risk calculus of central banks. As dollar-denominated bonds face increased exposure to currency fluctuations and sanctions, the precious metal presents a politically neutral and physically secure alternative. The value of RBI’s gold holdings has been further amplified by a meteoric rise in prices—from Rs 78,000 per 10 grams at the beginning of the year to Rs 1,02,000, a nearly 25% increase.
A global phenomenon
India’s strategy is part of a larger global trend. Central banks around the world added over 1,050 tonnes of gold to their reserves in 2024, according to the World Gold Council—marking the third consecutive year of purchases exceeding 1,000 tonnes. This is more than double the average of 473 tonnes between 2010 and 2021. The National Bank of Poland led the charge with a 90-tonne addition, aiming to raise gold to 20% of its reserves.
This coordinated buying spree has not only underpinned gold’s price surge but also raised fundamental questions about the long-term sustainability of a dollar-dominated reserve system. Germany, Italy, France, and China continue to hold vast reserves of the precious metal, with India rapidly climbing the ranks as a major gold accumulator.
De-dollarisation and strategic diversification
At the heart of this movement lies a growing effort to de-dollarise. The BRICS bloc—Brazil, Russia, India, China, and South Africa—has been particularly vocal in its attempts to reduce reliance on the greenback. These efforts have taken shape through bilateral trade in local currencies, development of alternative payment systems, and increased holdings of non-dollar assets, gold being the most prominent.
The trend is not merely ideological but stems from a rational response to the weaponisation of the dollar through financial sanctions. Countries like Russia have faced asset freezes; others fear similar treatment. Gold, by contrast, is tangible, portable, and universally accepted.
This shift has profound implications. While the dollar continues to be central to global finance, its monopoly is under siege. As central banks diversify into the precious metal, the metal is no longer just a hedge—it’s a quiet rebellion against financial hegemony.
Market forces and the limits of US exceptionalism
The rise in gold’s stature also reflects structural weaknesses in global equities, particularly the US stock market. According to Bloomberg Intelligence, the precious metal’s 27% rise this year coincides with a 15% decline in crude oil and a marked underperformance of the S&P 500. With the US equity market stretched to historic highs—its market cap now more than twice that of the MSCI Ex-US Index—analysts warn of a potential 30% drawdown if recession fears materialise.
Indeed, commodities are flashing recession signals. Falling copper and energy prices, coupled with declining bond yields in China and Europe, suggest that deflationary pressures are mounting globally. As these forces gain strength, the allure of gold—as a countercyclical, non-yielding but inflation-resistant asset—only intensifies.
Inflation, interest rates, and volatility
Yet gold is not immune to volatility. Spot prices have fluctuated wildly in response to interest rate hikes, currency shifts, and inflation outlooks. The dollar’s recent strength, powered by rising US interest rates, has weighed on gold’s dollar-denominated returns. But against other currencies—like the Japanese yen or the British pound—gold has delivered double-digit gains.
Gold also closely tracks real treasury yields, which are adjusted for inflation expectations. When these rise, gold typically loses appeal, as safe-yielding assets like US Treasuries become more attractive. But if inflation is seen as persistent and tied to structural issues—like supply chain disruptions or energy shocks—then gold regains its safe-haven status.
As Piero Cingari of Capital.com notes, “When inflation expectations rise faster than nominal yields, investors lose confidence in fiat currencies and seek safety in gold.” This dynamic played out during the 2008 crisis, the Covid-19 pandemic, and now again in the face of geopolitical instability and economic slowdown.
The Indian context: Strategic and cultural
For India, gold is not just a macroeconomic asset—it is also culturally embedded. From household savings to festival purchases, the metal holds social significance. The RBI’s decision to boost its gold reserves and store a larger share domestically reflects both strategic foresight and national sentiment.
India’s move also signals confidence in managing exchange rate volatility, especially in an era when capital flows are unpredictable and global markets are highly sensitive to US monetary policy.
Investing in a shifting world
Retail investors are also raiding the gold wave, turning to bullion, ETFs, and futures contracts. While physical gold remains a popular choice, it lacks yield and incurs storage costs. ETFs and contracts for difference (CFDs) offer exposure to price movements without the burden of physical ownership but come with leverage-related risks. The yellow metal can be highly liquid and volatile—and traders need education in risk management.
Ultimately, the precious metal is neither a panacea nor a perfect hedge. It is, however, the clearest signal yet that the old order is being challenged. Central banks are preparing for a new financial world—one where resilience, diversification, and sovereignty matter more than ever.
In this age of uncertainty, gold has re-emerged as the compass pointing through the fog of economic instability. The world may not have reached a financial reset yet—but the yellow metal is certainly preparing for it.