As Gold Glitters Again: What It Means for the Dollar’s Future
By Sanjeev Oak
Gold is gleaming at record highs once again — but its shine tells a deeper story. Behind the rally lies a growing unease about debt, geopolitics, and the dollar’s durability. From the Nixon shock to the Volcker era and now de-dollarisation, gold reflects the world’s anxieties in real time.
In October 2025, gold prices touched a new lifetime high of $2,550 per ounce, up nearly 23% since January — the strongest run since the pandemic.
In India, gold futures crossed ₹1,00,000 per 10 grams, also a record, even though the rupee has remained relatively stable.
Over the past three years, gold has risen nearly 60%, outperforming major equity indices like the S&P 500 and MSCI Emerging Markets Index during periods of global tension.
“Every time the world questions the dollar, gold finds its voice again.”
A Familiar Pattern in History
Each time the world has faced financial turmoil or a crisis of confidence in the dollar, gold has emerged as a refuge.
In the 1970s, after the collapse of the Bretton Woods system and the US decision to abandon the gold standard, inflation spiralled across the West. Gold prices soared from $35 per ounce in 1971 to $850 by 1980 — a 23-fold surge — as currencies wobbled and oil shocks battered economies.
But the rally met its match in Paul Volcker, the newly appointed US Federal Reserve Chairman, who in 1979 launched an aggressive campaign to tame inflation.
“Volcker’s sharp interest rate hikes — famously called the ‘Volcker Shock’ — restored faith in the dollar but ended gold’s first great supercycle.”
By 1981, Volcker had pushed benchmark interest rates to nearly 20%, triggering a recession but anchoring inflation expectations and stabilising the greenback. Gold, which had symbolised panic over paper money, fell by almost 60% over the next few years.
The lesson endured: whenever central banks act decisively to restore credibility, gold’s fever breaks — at least temporarily.
From Wall Street Collapse to Pandemic Panic
Nearly three decades later, gold’s next major rally came in the aftermath of the 2008 Global Financial Crisis. As the US Federal Reserve and other central banks unleashed unprecedented quantitative easing, investors fled to the perceived safety of gold. Between 2008 and 2011, prices surged from $700 to $1,900 per ounce — a 170% rise — reflecting fears that easy money would debase fiat currencies.
Then came 2020, when the COVID-19 pandemic froze global supply chains and forced massive fiscal interventions. Gold breached $2,070 per ounce, setting a new record as central banks expanded balance sheets and investors sought stability.
Today’s rally, in contrast, is not driven merely by crisis, but by a slow erosion of trust — a geopolitical and structural unease with the dollar itself.
Geopolitics and the De-Dollarisation Undercurrent
The trigger this time is not just inflation or interest rates — it’s geopolitical realignment. The BRICS nations have accelerated efforts to trade in local currencies, while central banks — from China to Turkey — are buying gold at record levels.
According to the World Gold Council, global central bank purchases reached 1,037 tonnes in 2023, the second-highest total ever recorded, and are on track to match or exceed that figure in 2025.
China alone has added over 300 tonnes to its reserves since 2022, while trimming its US Treasury holdings by nearly 20% over the same period.
“For emerging economies, gold is no longer just an asset — it’s an insurance policy against the dollar.”
This quiet accumulation marks a subtle vote of no confidence in the US-led financial order. As the dollar becomes increasingly weaponised in sanctions and trade wars, nations are hedging against overdependence on it.
The US Debt Overhang and the Rate Pivot
Gold’s rally also reflects the mounting anxiety over America’s fiscal trajectory.
The US national debt has now crossed $35 trillion — about 125% of GDP — sparking concerns about long-term sustainability. Credit agencies have issued warnings, and repeated showdowns over debt ceilings have further eroded investor confidence.
The Federal Reserve, meanwhile, has kept rates near 5.25–5.5%, but markets now expect a series of rate cuts starting mid-2026 as growth cools. Falling real yields — the difference between nominal rates and inflation — tend to make gold more attractive, since its appeal lies not in interest but in stability.
“Gold doesn’t pay interest — but in a world of negative real yields, that’s no longer a disadvantage.”
India’s Paradox: A Strong Rupee, Stronger Gold
India remains the world’s second-largest gold consumer, after China.
Despite the rupee’s slight appreciation in 2025, domestic prices have hit new highs because global demand has overwhelmed currency effects. Imports touched 780 tonnes in FY25, up 11% year-on-year, even as the government pushes for sovereign gold bonds and digital alternatives to curb imports.
In rural India, gold continues to act as a store of value and credit, protecting households from inflation and crop uncertainties. With the festive season approaching, demand is expected to remain buoyant, keeping prices firm.
What Next? Correction or Continuation
Historically, gold rallies do not last forever — but they rarely collapse suddenly either.
In 2012, after touching $1,900, gold corrected almost 30% as the dollar strengthened and the US economy recovered.
This time, however, the rally feels structurally different — driven by central banks, not retail investors; by strategic hedging, not speculative frenzy.
“This time, the buyers are not chasing profits — they’re safeguarding sovereignty.”
The combination of fiscal stress, de-dollarisation, and global political uncertainty could keep gold elevated for years, redefining what “safe haven” means in an increasingly multipolar world.
The Dollar’s Future in Question
The real story, then, is not gold’s rise but the dollar’s gradual erosion as the world’s unchallenged reserve currency.
No single alternative — not the yuan, not the euro, not cryptocurrencies — yet matches the dollar’s liquidity or trust.
But the psychological shift is unmistakable: nations are preparing for a post-dollar world, however far off it may be.
For decades, the dollar’s dominance rested on two pillars — trust and Treasury yield. As both come under pressure, gold is quietly emerging as the counterweight.
The Silent Referendum
Gold’s rally is not merely a commodity cycle — it is a global referendum on faith in paper money.
Each central bank purchase, each investor shift, signals a creeping doubt in the dollar’s permanence.
If “weaponised finance” and debt-driven politics persist, gold above $2,500 could become the new normal, not an anomaly.
“Every ounce of gold bought today is, in essence, a vote against the future stability of the dollar.”
Author’s Note: This is not just a story of glitter or greed — it’s about global caution. Gold, once dismissed as an outdated relic, has become the quiet language through which nations express their deepest monetary anxieties.