Explained: Why are central banks accumulating gold in large quantities?

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₹60,000 per 10 grams to ₹71,132 per 10 grams. On April 12, they touched a record high of ₹73,958. This unprecedented surge in gold prices indicates heightened global uncertainty, driven by factors such as trade tensions, financial conflicts among global major powers, record-high interest rates in advanced economies, and ongoing wars, particularly in the Middle East.

Also Read: Gold price dips ₹3300 from all-time high. Should you buy in this correction? Amidst these uncertainties, investors seek refuge in "safe haven" assets, with gold being a traditional choice. Gold's status as a safe haven is rooted in its historical resilience during economic instability, geopolitical crises, and market downturns.

For centuries, gold has been prized for its scarcity and intrinsic value. Unlike fiat currencies susceptible to inflation and government policies, gold tends to maintain or appreciate its value over time. Consequently, investors often turn to gold as a reliable investment during periods of uncertainty.

Moreover, the surge in record equity market valuations is indirectly driving demand for gold as a portfolio diversifier. Recent years have witnessed a significant uptick in gold purchases, driven by robust buying from institutional investors, the retail segment, and central banks globally. Institutional investors are acquiring gold in anticipation of a potential interest rate cut by the U.S.

Federal Reserve. Also Read: Equities or other asset classes? What should you pick ahead of election results Gold is renowned for its resilience as an investment. In periods of falling interest rates, gold prices typically ascend, as investors find bullion more attractive compared to income-paying assets such as bonds.