From scarcity to speculation: What’s fueling gold’s record run, and can it sustain?
Gold, which averaged $1,462 per ounce in FY20, has steadily climbed to $3,465 this year — with prices touching $4,053 in October alone.
- Nov 29, 2025,
- Updated Nov 29, 2025 4:34 PM IST
Gold prices have surged to record highs this year, but noted economist Madan Sabnavis warns that the current momentum may not sustain unless another shock hits the global system.
In a recent article for The Indian Express, Sabnavis linked the rally to the classic economic principle known as the “paradox of value” — where essentials like water are priced low, while less critical items like gold and diamonds command a premium. “This is due to the marginal utility attached to the product as well as scarcity,” he wrote.
Gold, which averaged $1,462 per ounce in FY20, has steadily climbed to $3,465 this year — with prices touching $4,053 in October alone. While physical demand has remained largely stable, a cocktail of factors — including a weakening dollar, speculative futures trading, central bank diversification, and investor interest in China and India — has inflated prices, Sabnavis noted.
This price surge has implications beyond investment portfolios. “Gold has a weight of 1.08 per cent in the consumer price index, which means that the present inflation numbers on the core side... are largely up due to it,” he said. That makes the Reserve Bank’s monetary policy decisions even more complex.
India’s gold imports also tell a nuanced story. While FY24 saw 795 tonnes of gold coming in, the figure dipped slightly to 757 tonnes in FY25. But the value has soared, with gold now accounting for nearly 9% of total imports worth $451 billion in the first seven months of the fiscal.
Despite global tariff shocks being largely absorbed, Sabnavis struck a cautious note on future price movements. “The future of the US economy is still uncertain... a sharp upside looks less likely. But can the price dive downwards? One can’t say for sure.”
Gold prices have surged to record highs this year, but noted economist Madan Sabnavis warns that the current momentum may not sustain unless another shock hits the global system.
In a recent article for The Indian Express, Sabnavis linked the rally to the classic economic principle known as the “paradox of value” — where essentials like water are priced low, while less critical items like gold and diamonds command a premium. “This is due to the marginal utility attached to the product as well as scarcity,” he wrote.
Gold, which averaged $1,462 per ounce in FY20, has steadily climbed to $3,465 this year — with prices touching $4,053 in October alone. While physical demand has remained largely stable, a cocktail of factors — including a weakening dollar, speculative futures trading, central bank diversification, and investor interest in China and India — has inflated prices, Sabnavis noted.
This price surge has implications beyond investment portfolios. “Gold has a weight of 1.08 per cent in the consumer price index, which means that the present inflation numbers on the core side... are largely up due to it,” he said. That makes the Reserve Bank’s monetary policy decisions even more complex.
India’s gold imports also tell a nuanced story. While FY24 saw 795 tonnes of gold coming in, the figure dipped slightly to 757 tonnes in FY25. But the value has soared, with gold now accounting for nearly 9% of total imports worth $451 billion in the first seven months of the fiscal.
Despite global tariff shocks being largely absorbed, Sabnavis struck a cautious note on future price movements. “The future of the US economy is still uncertain... a sharp upside looks less likely. But can the price dive downwards? One can’t say for sure.”