A break from traditional rate logic
Gold historically moves inversely to real interest rates. Yet between 2023 and 2025, prices climbed even as real rates remained positive. The report contends that markets now question the durability of those real returns amid record sovereign debt and mounting fiscal pressures.Manav Modi, Commodities Analyst at the firm, says investors view real yields as policy-driven and temporary. That perception lowers the opportunity cost of holding gold and reinforces its appeal as a hedge against systemic risks rather than short-term inflation alone.
This divergence from historical correlations, the report suggests, marks a structural shift: investors appear more focused on long-term fiscal sustainability and central bank independence than on headline rate levels.
Geopolitics and trade frictions add to demand
Rising geopolitical tensions across Eastern Europe, the Middle East, the Arctic and parts of Asia have sustained global uncertainty. At the same time, renewed trade disputes and tariff-related disruptions have heightened inflation volatility and currency swings.
Such conditions traditionally support demand for safe-haven assets. The report notes that slower growth combined with sticky price pressures has strengthened gold’s position as a neutral store of value during periods of macro stress.
Fiscal stress and questions over monetary independence
The firm also links gold’s strength to rising political pressure on central banks and growing debt-servicing burdens. Elevated fiscal deficits make it difficult for policymakers to maintain restrictive monetary policy for extended periods, especially when growth slows.Navneet Damani, Head of Research – Commodities, argues that gold now functions increasingly as “non-sovereign money”—an asset outside politically influenced systems. According to the report, this perception has shifted gold from a tactical hedge to a strategic reserve allocation for many investors.
Tight physical supply reinforces prices
Beyond macro drivers, supply constraints have added structural support. Global mine output growth remains limited, inventories on major exchanges have declined, and new mining projects face long development timelines and higher production costs. These factors have reduced the availability of deliverable metal, cushioning prices during bouts of volatility.
India, currency moves and ETF flows
Currency depreciation across several emerging markets, including India, has amplified local gold prices and reinforced household demand. The report highlights a recovery in exchange-traded fund inflows after years of outflows, with India emerging as a growing market for financialised gold products alongside traditional consumption.
Central banks anchor the rally
Central banks have remained consistent buyers, adding roughly 1,000 tonnes annually for four consecutive years. The report says this reflects formal reserve diversification strategies rather than opportunistic accumulation, driven partly by concerns over sanctions risk and over-reliance on dollar-denominated assets.
Steady official sector purchases have created a strong demand floor, limiting downside volatility even as prices reached record highs.
A structural repricing, not a short-term spike
Looking ahead, the firm expects gold to remain supported around and above $5,000 per ounce, citing constrained supply growth, ongoing reserve diversification and persistent geopolitical risk.
The report says that the current rally differs from past inflation-led cycles. Instead, it reflects waning trust in fiscal and monetary systems and a re-evaluation of gold’s role in global portfolios. If these structural forces persist, analysts suggest gold’s repricing may represent a longer-term shift in the architecture of global finance rather than a temporary surge.
