Global gold prices have surged to fresh highs, driven primarily by heavy purchases from central banks and rising geopolitical uncertainty, according to Union Finance Minister Nirmala Sitharaman. Speaking after addressing the Reserve Bank of India’s Central Board on February 23, she said that official sector demand has been a key force behind the bullion rally, signalling broader concerns about global financial stability.

“Gold price spike because central banks globally buying a lot of it,” the minister said at a press briefing, reinforcing a trend observed over the past several quarters as monetary authorities diversify reserves away from traditional currencies. Her remarks come at a time when gold is increasingly being viewed as a hedge against geopolitical risks, inflation shocks, and currency volatility.

The surge in prices reflects both structural and cyclical drivers. On the domestic Multi Commodity Exchange, gold opened at ₹160,049 per 10 grams for 24-carat purity on February 23, marking a sharp 2.02% increase from the previous close. Internationally, bullion remained firm, trading at $5,182 per ounce on Comex during morning deals, up about 2% in the previous 24 hours. Domestic benchmark rates compiled by the Indian Bullion Jewellers Association placed standard gold at ₹155,066 per 10 grams, a modest rise from the prior session but still near historic highs.

A combination of geopolitical tensions and renewed tariff threats from US President Donald Trump has further strengthened safe-haven demand. Trade frictions typically increase uncertainty in global supply chains and growth prospects, prompting investors to shift toward assets perceived as stable stores of value. The softer US dollar has also contributed to the rally by making gold cheaper for holders of other currencies.

Beyond market dynamics, the minister highlighted broader economic signals. She indicated that India would continue pursuing free trade agreements with major economies, arguing that such deals are intended to strengthen long-term growth prospects and global integration. According to her, uncertainty in the global environment has always existed, but proactive trade engagement can help cushion domestic economic activity.

At the same time, Sitharaman acknowledged that global capital flows into India have not been as strong as macroeconomic fundamentals might suggest. She pointed out that capital typically moves toward economies offering stability and predictability for businesses, yet flows can also be shaped by political and strategic considerations that extend beyond purely economic factors.

This observation reflects a wider shift in international finance. In periods of uncertainty, investors often prioritize liquidity and safety over growth potential, leading to capital reallocation toward developed markets or reserve assets such as gold. For emerging markets like India, this can translate into currency volatility, tighter financial conditions, or reduced foreign portfolio investment even when domestic growth remains robust.

The rise in gold prices carries mixed implications for the Indian economy. On one hand, it benefits households that traditionally hold gold as a store of wealth and supports sectors linked to bullion trade and financial products such as gold-backed investment instruments. Higher benchmark prices also influence the valuation of sovereign gold bond schemes, which are linked to domestic gold averages.

On the other hand, sustained high prices can widen India’s import bill, as the country remains one of the world’s largest consumers of gold. This can put pressure on the current account deficit and the rupee, particularly if energy prices also remain elevated. Elevated bullion prices may also dampen jewellery demand over time, affecting retailers and associated supply chains.

From a policy perspective, central bank accumulation of gold suggests a gradual shift in reserve management strategies globally. Authorities may be seeking diversification away from dominant reserve currencies amid concerns over sanctions risk, inflation, or fiscal sustainability in major economies. Such structural demand could keep prices elevated even if speculative flows moderate.

For financial markets, the rally signals persistent risk aversion. Strong inflows into gold and silver exchange-traded funds, reported in recent sessions, indicate that institutional investors are positioning defensively. This typically coincides with caution toward equities and emerging-market assets, though the relationship is not always linear.