Digging the dynamics of gold prices Premium

Investing in gold as a hedge against market uncertainties, geopolitical tensions, and inflation, with insights on pricing and types of gold.

Gold is always considered a haven and a good asset class for hedging. Financial experts suggest investing in it when in doubt or fear — be it of market crashes, volatility, recession, inflation, or hyperinflation. For this reason, not just individuals, even institutional players and countries at large invest in gold.

As per the World Gold Council (WGC) Q4 2025 data, India’s gold reserves are at 876.18 metric tonnes, and the Reserve Bank of India (RBI) was the second-highest central bank, after Poland, to purchase gold. India added 72.6 tonnes of gold to its kitty in 2024, raising its gold reserves bar by 9%, thereby putting India in the top 10 countries with the largest gold reserves.

The price of the yellow metal surpassed $3,500-an ounce and was an all-time high on April 22, 2025, owing to geopolitical tensions triggered by U.S. President Donald Trump’s tariff hikes. This is not a one-off moment when gold prices have reacted to the twists and turns in the global geopolitical landscape. History is replete with instances of gold buying frenzies despite the sticker shock. As per the WGC, around 2,16,265 tonnes of gold have been mined throughout history. So why this gold rush, and what determines gold’s price?

From the lens of investment, gold is not a ‘productive’ asset, insofar as regular cash flows. For informed investors, it might remain enigmatic as to why people buy gold when prices are on a tear, despite its ‘unproductiveness.’

Say for instance, investment in equity offers you part-ownership in a company and access to cash flows, in the form of dividends, in proportion to the number of shares you have purchased. On top of it, when the company grows, it gets reflected in the current market price. Likewise, you gain interest income for bonds, fixed/recurring deposits. Investing in a property gives you a rental income. But, gold doesn’t beget cash flows, and comes with the hassle of maintenance cost and safety concerns.

But financial experts view gold as a tool for hedging, rather than a mode of investment. When a storm of uncertainty unleashes, the anchor of gold keeps you afloat. Gold is used as a hedge not just against hyperinflation or market volatility, but also against extreme uncertainties.

It’s an axiomatic historical truth that during the toughest times of India-Pakistan Partition in 1947, millions of people were displaced, and those who carried gold heirlooms felt more secure financially. Gold is easily portable, cashable, and globally accepted, even though it is not considered a currency now.