Gold has been seen as one of the most preferred mode of investment and it's prices have been volatile. Few months ago, it's prices were rising and now they are falling due to a combination of macroeconomic, financial, and geopolitical factors. Let's have a look at them.

Strengthening of the US Dollar

Gold is priced in US dollars globally. When the dollar strengthens gold becomes more expensive in other currencies, reducing international demand. This puts downward pressure on gold prices.
 

In recent times, the US Dollar Index (DXY) has been rising due to strong US economic data. This made gold very costly and reduced it’s demand subsequently, moderating it’s prices.

High US Interest Rates

The US Federal Reserve has maintained high interest rates so that people borrow less and inflation reduces. When the central bank like the US Fed or India’s RBI increase the interest rates, the borrowers like Governments or corporations find it costly to borrow from the banks and issue bonds at attractive interest rates to attract investors money. This makes bonds ore attractive than gold and investors shift funds from gold to bonds or savings instruments for better returns.
 

Profit Booking After Gold Hit Record Highs

Recently Gold reached record highs in early April 2025 to 95000 per 10 gms. Many investors booked profits, triggering a correction. The selling pressure from institutional and retail traders caused prices to fall.
 

Reduced Geopolitical Risk Premium

Gold is a safe-haven asset during crises. Recent de-escalation in Middle East tensions, the chances of truce between Russia and Ukraine and no major new global conflicts have led to lower demand for safe assets. This has diminished the "fear premium" that supports high gold prices.
 

Bull run in Equity Markets and ETF Outflows

In the last 5-6 months, particularly in India, the stock market was very volatile which led investors to park a large amount in gold. Now since the companies performance data is encouraging, the charm in the equity market is back and investors have returned to the stock. This has reduced demand for gold and also Gold ETFs (Exchange-Traded Funds) saw net outflows in recent weeks.

A tabular summary of causes and effects is below