One key factor currently cooling gold prices is the easing of global inflation pressures, particularly in the United States, where annual inflation declined to 2.3 per cent in April 2025—the lowest rate observed in over four years.
As Indian investors, we have historically placed significant trust in gold, viewing it as a reliable safeguard against economic uncertainties and persistent inflation. The recent dramatic fluctuations in gold prices have naturally drawn our attention. After reaching extraordinary highs late in 2024 and early 2025, with gold prices touching around Rs 10,000 per gram (approximately Rs 1,00,000 per 10 grams), there has been a noticeable moderation. Currently, by mid-May 2025, gold prices in India have settled into a more subdued range of approximately Rs 9,600 per gram (Rs 96,000 per 10 grams). This moderation leads many investors to ponder whether the golden rally is merely taking a brief pause or signalling a deeper, fundamental shift in the market.
One key factor currently cooling gold prices is the easing of global inflation pressures, particularly in the United States, where annual inflation declined to 2.3 per cent in April 2025—the lowest rate observed in over four years. Traditionally, investors flock to gold during high inflation periods to safeguard their purchasing power. However, with inflation now moderating, the urgency for investors to heavily allocate funds toward gold diminishes. Consequently, many investors are using this window to book profits or diversify their portfolios into alternative assets.
Additionally, geopolitical tensions, notably the prolonged trade friction between global economic giants like the US and China, have shown temporary signs of easing. For investors in India, whose markets tend to react swiftly to global developments, this reduced geopolitical uncertainty makes riskier investments, particularly equities, appear more attractive. A decline in geopolitical risks typically leads to a corresponding decrease in gold’s appeal as a safe haven, further influencing its price moderation.
Another significant factor at play is the current stability in global interest rates. With major central banks, notably the U.S. Federal Reserve, maintaining a steady stance on interest rates, gold, a non-interest-bearing asset, becomes relatively less attractive. Investors seeking predictable returns are thus turning towards bonds and other interest-bearing instruments, temporarily reducing demand for fresh gold investments.
Despite this, several indicators strongly suggest that the present calm in gold prices might not persist for long. Inflation, although currently subdued, continues to pose a latent risk. Ongoing supply chain disruptions, persistent geopolitical tensions, and unpredictable global fiscal policies could swiftly revive inflationary pressures, thereby restoring gold’s attractiveness as a reliable hedge.
“Gold’s decline isn’t a sign of weakness — it’s a reflection of temporary optimism in global markets,” says Anand K Rathi, Co-founder of MIRA Money.
Moreover, central banks, particularly in emerging economies including India, are consistently adding gold to their reserves. This steady institutional buying provides a fundamental, structural support to gold prices, cushioning them against short-term fluctuations. India’s substantial gold consumption, driven by deep-rooted cultural affinity as well as strategic investment considerations, also continues to
Lastly, any significant slowdown or downturn in the global economy could rapidly reignite investor interest in gold. Historically, during times of recession or stagflation—periods characterised by low economic growth combined with high inflation—gold prices have consistently demonstrated resilience, often significantly outperforming other asset classes.
“The underlying drivers for gold, such as central bank accumulation, long-term inflation concerns, and currency volatility, remain intact. Gold may have lost momentum for the moment, but its strategic value in a diversified portfolio is far from diminished,” Rathi added.
