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Gold in $ terms has risen by ~43% yoy (May’24 – Apr’25) This is after a 15% rally in the previous year. A strong rally in gold particularly when other asset classes like commodities, equities, crude and even global rates are volatile have been driven largely by global factors. Uncertainty is always gold’ friend and gold is treated as a safe haven. Given the heightened tension in the last one year in geo-politics, along with central bank purchases, it is expected that gold has more legs down the road, driven by a) Reserve accumulation and b) geo-political uncertainty c) comparison of past rallies.

* Reserve accumulation: Gold as a % of reserves are the highest now (from 2000), and has seen a meaningful increase since 2021. While we have not had geo-political conflicts like now in the last three decades, the peaks of 12-13% as of 2021 was seen in 2000, 2011. But since 2019 from 12% it has climbed more than 18% in 2024. In 2011, reserve build could be a driver but in 2000 onwards the peak which was sustained was not led by reserve build.

* Uncertainty always leads to gold as a safe haven. With the US losing its status as the safe haven (dollar decline, US treasury yields climbing higher), and no resolution of US-China tariff wars, uncertainty could linger for longer.

*  This rally has lasted for ~130 weeks. The past rallies (since 1975) with the exception of 1983 which lasted only for 34 weeks, every other rally has lasted for 146 -241 weeks. So this rally has more legs to go. This time it is both, reserves + uncertainty are driving the rally,

I would conclude that perhaps gold could have more legs in this rally. Or at least we would not see any meaningful reversal unless uncertainty simmers, which is not expected in the near term. For India, domestic prices, Rupee depreciation will be another factor which will keep gold price rise intact.

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