Is gold still a safe bet this Akshaya Tritiya? Here’s why experts say prices could hit $4,500

Gold has captured global attention by reaching unprecedented heights this year. The precious metal recently soared to a record high of $3,300 per ounce on April 16, 2025, reflecting a significant uptrend driven by a confluence of economic and geopolitical factors that are expected to continue supporting gold prices.

According to the Tata Mutual Funds report, following are the current drivers behind gold’s ascent

1. Central Bank Accumulation: Central banks, notably in Asia, have intensified their gold purchases in response to escalating geopolitical tensions. As can be inferred from the following graph showing % of Gold reserves held in Gold, emerging markets and especially China have a low amount of their reserves in the form of Gold. China, the largest buyer holds around 8% of its reserves in gold, compared to 70% for the US, Germany, France, and Italy. The global average is roughly 20%. If China were targeting an allocation of 20% and maintained an average pace of 40 tons per month (in line with recent patterns), it would take approximately three years to reach a 20% gold share. This is expected to continue providing support to gold prices going forward. Goldman Sachs estimates central bank buying could average 100 tons per month in 2025.

2. Dollar Index Effect: The US Dollar Index (DXY) has weakened in 2025. A weaker dollar historically supports higher gold prices since gold is priced in USD globally. With the Trump administration favouring a weaker dollar and the uncertain effect of tariffs, this could serve as an additional tailwind for gold.

3. Economic Uncertainty: Trade disputes and recessionary fears resulting of Trump administration's uncertain and ad-hoc tariff policy have led investors to seek refuge in gold.

4. Inflationary Pressures: Inflation concerns which had come down in recent months have escalated again on the back of tariffs and weaker dollar policy of the current U.S. deposition. This has led investors to hedge against expected spike in inflation with assets like gold.

5. ETF Inflows: The above factors have led to ETFs backed by gold witnessing substantial inflows, with UBS projecting inflows to reach 450 metric tons in 2025.

The report highlights the following considerations for investors

As you contemplate gold investments this Akshaya Tritiya:

- Portfolio diversification with gold.

- Focus on the long-term value of gold.

- Stay informed on global economic indicators and central bank policies.

What lies ahead?

The report stated, "Gold prices may continue to trade firm in the medium term due to central banks buying, expected rate cut, a weaker dollar, inflation and economic uncertainty (arising from tariff uncertainty), ETF inflows and geopolitical factors."

Leading financial institutions have adjusted their forecasts:

• Goldman Sachs: Raised year-end forecast to $3,700/oz, with a potential peak of $4,500.

• UBS: Projects gold at $3,500/oz.

• Bank of America: Increased 2025 forecast to upto $3,500/oz.

While short-term corrections are possible as Gold prices have rallied more than 25% in the past 6 weeks, historically this has taken 3-5 months, long term fundamentals remain supportive, per Tata mutual fund report.