Gold has delivered one of the most remarkable performances of any major asset class — up approximately 183% over the past five years, a CAGR of roughly 23% according to The Economic Times. With prices currently around $4,077/oz internationally and ₹14,562/gram in India, many investors are asking: what exactly is driving this surge, and will it continue?

Reason 1: Record Central Bank Gold Buying

For three consecutive years, the world's central banks have collectively purchased over 1,000 tonnes of gold annually — an extraordinary and sustained level of institutional demand. China's PBOC, India's RBI, Poland, Turkey, and several Central Asian nations are leading this trend.

The driving force is "de-dollarization." After the United States froze Russia's foreign exchange reserves in 2022 following the Ukraine invasion, many countries realized that dollar-denominated reserves can be politically weaponized. Gold held domestically cannot be frozen by any foreign government — making it the preferred reserve asset for nations wary of geopolitical risk.

Reason 2: US Dollar Weakness from Rising National Debt

The US national debt has crossed $38 trillion with no credible reduction plan in sight. Gold and the dollar typically move inversely — as confidence in the dollar's long-term value erodes, gold becomes more attractive as an alternative store of value that cannot be "printed" by any government.

The Federal Reserve faces a difficult balancing act: raising interest rates to fight inflation risks recession, while holding rates allows the dollar to weaken further. Both scenarios have historically been supportive of gold prices.

Reason 3: The Strait of Hormuz Crisis

Approximately 20% of the world's oil and LNG supplies pass through the Strait of Hormuz. Escalating US-Iran tensions in 2026 have pushed Brent crude above $100/barrel — the highest level since 2022 — creating both inflation concerns and a flight to safe-haven assets like gold.

Reason 4: Persistent Inflation Concerns

Gold has historically been the most reliable hedge against sustained inflation. With oil prices elevated and supply chains still adjusting post-pandemic, inflation expectations remain a key driver of gold demand among both institutional and retail investors.

Reason 5: Growing Retail and Digital Investment Demand

India's gold investment demand in bars and coins reached 280.4 tonnes in 2025, a 17% increase from 2024. The rise of digital gold platforms, Gold ETFs, and Sovereign Gold Bonds has made gold investing accessible to millions of new retail investors who previously only bought jewellery.

2026 Gold Price Forecasts — Major Banks

Bank 2026 Target Implied Upside
JP Morgan$6,300+55%
Wells Fargo$6,100+50%
UBS$6,200+52%
Goldman Sachs$4,900+20%
Macquarie$4,323+6%

People Also Ask

Why has gold increased so much in the last 5 years?â–ŧ
Gold has increased approximately 183% over the past 5 years (CAGR ~23%) primarily due to record central bank gold buying (1,000+ tonnes/year for 3 consecutive years), persistent global inflation post-pandemic, US dollar weakness from rising national debt ($38 trillion), and repeated geopolitical crises including the Russia-Ukraine war and the ongoing Strait of Hormuz tensions.
Will gold price come down in 2026?â–ŧ
Some analysts believe gold could correct if the Strait of Hormuz crisis resolves and oil prices fall, removing the geopolitical risk premium. However, major banks like JP Morgan ($6,300 target), UBS ($6,200), and Wells Fargo ($6,100+) maintain bullish 2026 forecasts due to structural central bank demand that is unlikely to reverse quickly.
How does the US Dollar affect gold prices?â–ŧ
Gold and the US Dollar typically move inversely. When the dollar weakens (due to rising debt, lower interest rates, or reduced confidence), gold becomes cheaper for foreign buyers and more attractive as an alternative store of value, pushing prices up. The US national debt crossing $38 trillion in 2026 has been a key driver of dollar weakness.
Why are central banks buying so much gold?â–ŧ
Central banks, led by China's PBOC, India's RBI, Poland, and Turkey, have purchased over 1,000 tonnes of gold annually for three consecutive years. The main driver is "de-dollarization" — after the US froze Russia's dollar reserves in 2022, many countries realized dollar-denominated reserves can be politically weaponized. Gold held domestically cannot be frozen by foreign governments.
Does gold price increase during war or geopolitical crisis?â–ŧ
Yes, historically gold acts as a "safe haven" during geopolitical crises. The current Strait of Hormuz crisis (US-Iran tensions affecting 20% of global oil shipping) has pushed both oil above $100/barrel and gold prices higher, as investors seek assets that retain value during instability.

What This Means for Investors

The structural drivers behind gold's rise — central bank de-dollarization, US fiscal concerns, and geopolitical instability — are unlikely to reverse quickly, even if short-term corrections occur. For investors, this suggests gold remains a relevant portfolio component (typically 5-15% allocation) for long-term wealth preservation, regardless of short-term volatility.