A world of gold: How the yellow metal is tied to the dollar, oil and global finances

Global financial markets are not woven from a single thread. They form a tangled triangle with three corners: Gold, US Dollar and crude oil. When you see the gold price climbing at a jeweller’s shop in your city, the cause is not local demand alone. At that very moment, the Federal Reserve is meeting in Washington, oil tankers in the Gulf are either moving ahead or stuck, and the central banks of countries such as India, China and Poland are quietly adding to, or reducing, the gold in their vaults.

Gold has been regarded for thousands of years as the most trustworthy form of wealth. Paper currencies, by contrast, rest on the promises and the strength of governments. When those promises come into doubt, when war breaks out, or when oil prices set off inflation across the world, money runs towards gold in search of safety. But 2026 added an interesting twist to this old story: in the middle of the world’s biggest oil crisis, gold fell instead of rising. Why? This article explains both the ‘straight’ and the ‘inverted’ halves of that story in simple terms.

A word on where these numbers come from. Gold has no single price fixed by any government, but it does have a benchmark, and for a century that benchmark has been set in London. Twice every working day, at 10:30 am and 3:00 pm, banks and trading firms that belong to the London Bullion Market Association (LBMA), the trade body that writes the rules of the world’s wholesale gold market, join an electronic auction run by ICE Benchmark Administration. The auctioneer proposes a price in dollars, buyers and sellers say how much they would trade at that level, and the price is nudged up or down, round by round, until the two sides roughly match. The result is the LBMA Gold Price, the yardstick that miners, refiners, jewellers, ETFs and central banks use to value contracts and holdings. Until 2015 the job was done by a handful of banks in a daily ‘fix’, a tradition dating back to 1919; the auction replaced it after regulators took action over the old system in 2014. It is a snapshot, not a decree: the real price is formed by round-the-clock trading in London, New York and Shanghai, and the auction simply captures it twice a day.

So why do the miners not set the price? Because gold is less a commodity to be consumed than a store of wealth. Almost all the gold ever mined, well over 200,000 tonnes, still exists, while the world’s mines add only about 3,600 tonnes a year, under 2% of that stock. A bumper or poor harvest of gold therefore barely moves the price; investors, central banks and interest rates do. London became the hub because it had the vaults, the banks and the Bank of England, and because South African mines, which produced about 1,000 tonnes a year in the 1970s, routed their output through it for decades. South Africa now mines a small fraction of that, and producers such as Ghana and Indonesia are price-takers: they sell at the world price, while their costs are paid in local currency. Even China, the biggest producer, keeps its own yuan benchmark in Shanghai, but it consumes more gold than it digs up.

Now, a few rough numbers. According to the LBMA, the average price of gold in 1996 was about $388 an ounce. In January 2026 it reached about $5,600, and at the start of October 2026 it stands at around $4,130 to $4,160. That is roughly 10.7 times in 30 years, which works out at an average return of about 8% a year in dollars. In rupees, the return was even bigger. According to a Reserve Bank of India table, the average price of 10 grams of gold in 1996-97 was about ₹5,071. On 8 October 2026, the base price of 24-carat gold (before tax and making charges) was about ₹1,49,570 per 10 grams. That is roughly 29 to 30 times, or about 12% a year. This is a rough calculation, because the two figures come from different sources.

The last 30 years (1996–2026): The changing fortunes of gold

Over the past 30 years, gold’s journey has been a roller-coaster rather than a straight climb. In that time, gold rose from the depths of neglect to become one of the largest strategic reserves of central banks. But there were deep pits along the way: a fall of about 35% from the 1996 average of $388 to the 1999 low of $252.80; a fall of about 44% from the 2011 peak (about $1,900) to the 2015 low (about $1,060); and a fall of about 27% from the January peak in 2026. The climbs were just as sharp: in 2025 gold rose by about 64%, its biggest annual gain since 1979. Let us look at it in five stages.

The dot-com boom and the years of neglect (1996–2000)

In the late 1990s, the world’s eyes were on the shares of internet companies. The American economy was growing fast, inflation was under control and the stock market was rising. In such an atmosphere, gold had begun to look like an “old-fashioned thing”. The Federal Reserve raised interest rates between June 1999 and May 2000, which further reduced the appeal of gold, which pays no interest.

The numbers bear witness to this neglect. According to LBMA annual averages, gold was about $387.87 in 1996, $278.57 in 1999 and $279.10 in 2000. In other words, the average price came down by about 28% between 1996 and 2000.

It was in this period that gold’s most talked-about blunder occurred, known as ‘Brown’s Bottom‘. On 7 May 1999, the Bank of England, under the then Chancellor of the Exchequer Gordon Brown, announced that it would sell roughly half of its gold reserves. About 395 tonnes of gold was sold, raising roughly $3.5 billion. Prices began falling even before the first auction (6 July 1999), and on 20 July 1999 gold touched $252.80, the lowest level in two decades.

The fall was so sharp that in September 1999 European central banks, including the Bank of England, signed the ‘Washington Agreement’ and capped their gold sales at 400 tonnes a year. The amusing thing is that the 395 tonnes that were sold would be worth more than $50 billion at today’s price. (This calculation was made for this article: 395 tonnes is about 12.7 million ounces, multiplied by the October 2026 price of $4,150.)

So by 2000, the world had almost forgotten gold. And it was right here that the story began to turn.

The 9/11 attack, Iraq war and the return of gold (2001–2007)

When the dot-com bubble burst, the stock market fell. Then came the attack of 11 September 2001, and in 2003 the Iraq War began. Uncertainty rose around the world, and the Federal Reserve cut rates in 2002 and 2003. According to reports, rates fell to their lowest level in 45 years. Cheap money and growing fear were the right mixture for gold.

Gold climbed slowly but steadily. According to LBMA averages, gold rose by about 17.3% in 2003 to average $363.32. In 2007 it averaged $695.39, a rise of about 15.2% for that year. In November 2007 the LBMA price went as high as $841, crossing $800 for the first time since 1980. In 1980, gold had touched a peak of roughly $850.

The attitude of central banks also began to change in this period. The Washington Agreement was extended in 2004 and 2009, which meant that large-scale selling stayed under restraint. Gold was now turning from something to be sold into something to be held on to.

The 2008 global financial crisis: the real turning point

2008 is the most instructive year in gold’s story, because it shows both of gold’s faces.

In March 2008, the bank Bear Stearns reached the brink of collapse and had to be sold in a rescue. In the same month, gold crossed $1,000 for the first time. The LBMA’s highest price was $1,011.25. Then, on 15 September 2008, Lehman Brothers collapsed and chaos spread through the markets. Surprisingly, by October 2008 even gold had fallen to around $712.50, about 30% below its peak. The reason was ‘liquidity’: investors who urgently needed cash to cover losses on shares sold whatever could be sold… and gold sells easily. We will discuss this in more detail later, in the section ‘Stock Markets versus Gold’.

But once the storm subsided, gold turned around. In December 2008 the Federal Reserve cut rates to between 0 and 0.25%, which had never happened before, and that position lasted until December 2015, about seven years. Between November 2008 and August 2011, gold rose by about 170%. The story of crude oil that year was also dramatic: on 11 July 2008, WTI reached a record $147.27 a barrel and by December had fallen to about $32.

2008 is a turning point for gold because the whole world’s trust in banks and government policy was shaken, and gold earned a new identity: the asset that survives after a crisis.

The Eurozone crisis and the years of stagnation (2011–2019)

Amid Europe’s debt crisis and the upheaval in the Arab countries, gold reached its then peak of around $1,900 in September 2011 (many sources give $1,910 to $1,920). In March 2011, Brent crude had also gone as high as $127.

Then came a long slide. In 2013, gold’s annual average fell by about 15.5% to $1,411. In that same year its price went from around $1,694 in January to $1,192 in June. By the end of 2015, gold had come down to about $1,060. In that same December 2015, the Federal Reserve raised interest rates for the first time in seven years. Higher interest rates put pressure on gold, which pays no interest.

After that, gold remained in a long period of stagnation. In 2014, 2016, 2017 and 2018, its annual average stayed at around $1,250. In 2019 gold rose by about 18.8% and closed the year at roughly $1,523, but the really big move was yet to come.

From the covid-19 pandemic to the historic super-rally of 2026

In March 2020, Covid shook the markets. In the early days (9 to 20 March), the fear was so great that people sold their gold to raise cash. Then the Federal Reserve took rates back to 0 to 0.25%, and gold came roaring back. Over the next six months, it rose by about 30%, and in August 2020 it crossed $2,000 for the first time. The annual average price for 2020 was about $1,774.

In 2022, Russia invaded Ukraine. Western countries froze about $300 billion of Russia’s foreign exchange reserves. Brent crude reached $139.13 in March 2022. Meanwhile, between March 2022 and July 2023, the Fed raised rates 11 times, taking them to 5.25 to 5.50%. By the old rule, gold should have fallen, but it held up: it was roughly flat (−0.23%) in 2022 and about 4.9% higher in 2023. An analysis by the European Central Bank (ECB) says that the old inverse relationship between gold and real interest rates broke down in 2022, because central banks began stockpiling gold out of fear of sanctions. In 2024, gold rose by about 26%.

Then came 2025, which can be called gold’s historic year. Gold rose by about 64%, its biggest annual gain since 1979. In October 2025 it crossed $4,000 for the first time. According to the World Gold Council (WGC), global gold demand in 2025 went past 5,000 tonnes for the first time (5,002 tonnes), and was valued at $555 billion. The annual average price was $3,431. The Fed cut rates in September, October and December 2025, to 3.50 to 3.75%, and the dollar index weakened by about 9.4% over the year. In other words, all three winds were blowing in gold’s favour: cheaper money, a weaker dollar and a frightened world.

On 12 January 2026, gold crossed $4,600 for the first time. On 28 January 2026, amid fears of a US-Iran war, it reached a record of about $5,600 an ounce. (Different sources put the peak anywhere between $5,590 and $5,602.)

After that, the story reversed. On 28 February 2026, the United States and Israel launched a war against Iran. The common belief was that gold would climb further, but the opposite happened. According to figures up to 8 May, Brent crude had risen about 37% since the war began, while gold had fallen about 10%. In March 2026, gold recorded the biggest monthly fall in its history ($611 an ounce), and by the end of the correction it was about 27% below the January peak. On 8 April, on news of a two-week ceasefire, gold jumped about 2% in a single day to $4,790, because oil fell and inflation fears eased. On 14 August 2026, it was at around $4,334, roughly 22.5% below the peak. At the start of October 2026, the price is between $4,130 and $4,160.

This is the biggest lesson of 2026: war raises fear (which pushes gold up), but war also makes oil expensive, raises inflation and keeps interest rates high (which pull gold down). In 2026 the second force won. We will understand this in more detail later.

The Dollar-Gold inverse equation

The Bretton Woods agreement and the collapse of the gold standard (historical background)

In July 1944, 44 countries gathered at Bretton Woods in the United States and created a new currency system. In it, the US dollar was tied to gold: $35 for an ounce of gold. The currencies of the other countries were tied to the dollar. This meant that the dollar was regarded as ‘as good as gold’, and America promised that foreign governments could return their dollars and take gold if they wished.

But by the 1960s so many dollars were circulating in the world that America no longer had enough gold to give in exchange for them. According to the historical documents of the US State Department, foreign aid, military spending and foreign investment had caused a flood of dollars. On 15 August 1971, President Richard Nixon ended the facility of converting dollars into gold, which is called the “Nixon Shock”. In the Smithsonian Agreement of December 1971, the official price of gold was set at $38, but the arrangement could not hold and currencies began to “float”, meaning that the market started to decide what they were worth.

From that day gold became an item with an open market price. The journey from $35 to today’s roughly $4,150 is about 118 times. In 1980 gold had gone up to about $850, and adjusted for inflation, that price is equivalent to roughly $3,200 to $3,325 today. In other words, in 2025-26 gold broke even the real (inflation-adjusted) record for the first time.

The dollar index (DXY) and gold’s direct opposition

The Dollar Index (DXY) shows how strong or weak the dollar is against six major currencies (the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc). Gold is sold in dollars, so when the dollar weakens, gold becomes cheaper for a buyer holding euros, yen or rupees, and demand rises. When the dollar strengthens, the opposite happens. This is the ‘inverse relationship’.

2025 is a good example. In January 2025 the DXY was above 109. In the first half of the year it fell by about 11%, the biggest first-half fall since 1973. Over the whole of 2025 the dollar weakened by about 9.4%, and in the same year gold rose by about 64%.

But this relationship does not always hold. In 2026, the dollar also rose as a ‘safe haven’. At the start of April, the dollar index reached a ten-month peak, and in June the dollar was heading for its biggest monthly gain in about a year. Gold stayed weak during this time. According to analysts, one reason is that America is now also a big energy exporter, so the dollar can find support during an oil shock, and when the world is frightened, many investors choose the dollar instead of gold. In other words, in times of fear both the dollar and gold are contenders, and in 2026 the dollar came out ahead.

Interest rates and opportunity cost

Gold pays neither interest nor dividends. So when banks or government bonds begin to pay good interest, holding gold becomes ‘expensive’. This is called opportunity cost. A simple example: if a 10-year American bond pays 5%, an investment of $10,000 earns about $500 a year. The same money in gold earns nothing for the year, and its gain comes only from the price rising.

Economists look at the ‘real interest rate’, which is the bond’s interest minus expected inflation. When the real rate falls, gold shines; when it rises, gold is held down. Look at the Fed’s moves: in 2022-23, rates rose from 0 to 0.25% to 5.25 to 5.50%. Between September and December 2025 there were three cuts, and the rate stood at 3.50 to 3.75%. Then, on 16 September 2026, the Fed raised rates by 0.25% for the first time since July 2023, to 3.75 to 4.00%. The decision was unanimous (12-0), and 12 of the Fed’s 18 officials projected one more increase (to 4.125%) by the end of the year. The yield on the 10-year US bond reached 5% for the first time in three years. Fed Chair Kevin Warsh said that inflation has been ‘too high for too long’, and according to reports, the main reason is energy made costlier by the Iran war.

This was the link that weighed on gold in 2026. Until January the market had been expecting two rate cuts in 2026. After the war that expectation vanished, and the talk now is of increases. So gold came under pressure despite being a safe haven.

The invisible network of crude oil and gold

What is the petrodollar system and how does it affect gold?

In October 1973, the Arab countries imposed an oil embargo on America, and in the last months of 1973 oil prices rose roughly fourfold. Suddenly the oil-producing countries had boundless money, and they had to put it somewhere safe. In June 1974 an agreement on economic and military cooperation was signed between America and Saudi Arabia. It is commonly said that after this Saudi Arabia priced its oil in dollars and invested its earnings in American bonds, and in return America assured it of security. This arrangement came to be called the ‘petrodollar‘.

Experts such as UBS chief economist Paul Donovan say that the original 1974 agreement was about economic cooperation and contained no condition that oil be sold ‘only in dollars’. In other words, the petrodollar is less a legal restriction and more a habit and a system: oil is priced in dollars, paid for in dollars, and the earnings go into dollar assets.

Its link with gold is direct. When every oil-buying country needs dollars, demand for dollars is sustained. When oil trade begins to grow in other currencies, especially the Chinese yuan, this built-in demand for the dollar falls, and the world looks for alternatives to the dollar (gold among them). In June 2024, news that the ’50-year petrodollar agreement had ended’ circulated widely, but it was formally treated as disputed. Even so, there are signs of change, because according to Fortune, China is now Saudi Arabia’s biggest oil customer.

In March 2026, a Deutsche Bank strategist said that the Iran war could mark the beginning of the ‘petroyuan’, because there were reports that Iran was letting ships pass through Hormuz in exchange for payment in yuan. According to an NPR report, Iran is also taking some tolls in yuan. Even so, according to analysts such as UBS, most oil deals, especially Saudi Arabia’s, are still done in dollars. In other words, a crack has appeared, but the building has not fallen.

Inflation transmission mechanism

The effect of oil does not stop at petrol and diesel. When oil becomes expensive, freight becomes expensive, fertiliser, plastic and electricity become expensive, and then everyday goods become expensive. (The Strait of Hormuz is also an important route for the world’s fertiliser trade.) When inflation rises, the central bank keeps interest rates high or raises them. High rates mean high real yields, and that puts pressure on gold. It is a chain: oil, inflation, interest rates, gold.

When oil becomes expensive, two paths open up before gold:

• The fear path: If people feel that governments or central banks will not be able to handle the situation, they buy gold and the price climbs.
• The rate path: If the central bank looks ready to fight inflation firmly, rates stay high and gold is held down.

According to an analysis published on Euronews, gold does not protect against inflation; it protects against the failure of the institution responsible for stopping inflation. In 2026 the Iran war created not a crisis of confidence but a supply shock, which the Fed appeared to be handling by keeping rates high. That is why gold weakened.

Past experience says the same. In 2008, oil went up to $147 and gold crossed $1,000 for the first time, but as the crisis deepened both fell (by December 2008, Brent was at about $36). In 2022, Brent went up to $139, the Fed raised rates 11 times, and gold stayed roughly flat for the whole year. In 2026, Brent jumped from about $72 on 27 February to a peak of around $120 (a leap of about 51% in March 2026, counted among the biggest monthly rises ever), and gold fell in that same period.

For India this is a double blow, because crude oil and gold are both our biggest imports. When oil became more expensive, the rupee weakened. According to reports, in May 2026 the rupee slipped to a record low of 95.71 against the dollar.

The mathematics of the gold-to-oil ratio

This is a very simple calculation: divide the price of one ounce of gold by the price of one barrel of oil. The answer tells you how many barrels of oil one ounce of gold can buy. At the start of October 2026, gold was at about $4,150 and US oil (WTI) at around $93, so the ratio works out at roughly 45 (this rough calculation was made for this article).

Compare this with history. Between 1970 and 2010 the average was about 17 barrels per ounce, and for most of the time it moved between 10 and 30. In April 2020, when WTI briefly went below zero, the ratio went above 90. In January 2026, one ounce of gold bought about 75 to 77 barrels of oil. Then the war came, oil rose and the ratio fell to between 43 and 50.

How should this be read? A high ratio shows that oil is cheap compared with gold, or that gold is expensive compared with oil. According to an AJ Bell analysis, in the past 56 years the ratio has gone above 40 only three times (1986, 2016 and 2020), and each time, 12 months later, oil was considerably higher. The same happened in 2026. But remember, this is a pattern from the past, not a prediction. There are only two ways for the ratio to fall: oil rises or gold falls, and in 2026 both happened.

War, Geopolitics & Crisis

From the gulf wars to the Russia-Ukraine Crisis

The relationship between war and gold is not as simple as ‘war happened, gold went up‘. In 2003, the year of the Iraq War, gold rose about 17.3%, but rates were also at a 45-year low at that time. In 2011, amid the upheaval in the Arab countries, Brent went up to $127 and gold was near its then peak. In 2022, after Russia’s attack, Brent went up to $139.13 and gold crossed $2,000 in March 2022, but stayed roughly flat for the whole year because the Fed was raising rates.

The most important thing about 2022 came not from the market but from the central banks. When Western countries froze about $300 billion of Russia’s foreign exchange reserves, an assessment by Metals Focus, cited by Reuters, says that from 2022 to 2024, central banks kept buying more than 1,000 tonnes of gold every year, more than double the average of the previous five years.

In January 2026, the fear of war took gold to $5,600, and as the real war began at the end of February it started to fall. Understand the rule like this: when war strikes at trust and safety, gold rises. When the same war makes oil expensive and thereby pushes up inflation and interest rates, gold can fall.

Middle-East tension (Iran-Israel) and the Strait of Hormuz crisis

The Strait of Hormuz is the route for about 20% of the world’s oil and about 20% of its LNG. The war began on 28 February 2026, and on 4 March Iran closed the strait. Qatar’s state-owned company declared ‘force majeure‘ on all its exports. The International Energy Agency (IEA) called it the biggest supply disruption in the history of the oil market. Brent jumped from about $72 on 27 February to around $120.

On 8 April a ceasefire was announced, and oil fell in a single day by its biggest percentage drop since April 2020. On 17 April Iran said it would open the strait and oil fell by more than 10%, but the movement of ships did not return to normal. By the start of July, Brent had returned to near its pre-war level (about $76), then rose after American strikes and went as high as $100.69 on 23 July. In August there was easing again (about $84 to $92), and at the start of September the price went to about $109. On 28 September, when President Trump rejected an Iranian proposal to open the strait within seven days, Brent again reached about $107. On 2 October, Brent stood at $102.30 and WTI at $93.05.

According to reports, at the start of October about 13.2 million barrels of oil a day were passing through Hormuz, while exports from the whole of the Middle East were said to have returned to about 98% of the pre-war level. In other words, things have improved but have not become entirely normal, and any attack can send prices soaring again.

For gold, the meaning is clear: the higher and more volatile oil stays, the more fear of inflation and interest rates will persist. That is why, at this moment, gold’s movement depends more on oil and the Fed than on gold itself.

De-Dollarisation: The secret strategy of central banks

According to the European Central Bank’s June 2026 report, at the end of 2025, gold had become about 27% of the world’s central banks’ foreign reserves, up from 20% a year earlier. US Treasury bonds fell from 25% to 22%, and Euro assets stayed at 15%. In this way, gold overtook Treasury bonds to become the second-largest reserve after dollar assets (42% in total). According to the previous edition of the same report, in 2024 central banks held about 36,000 tonnes of gold, which is almost equal to the mid-1960s peak (about 38,000 tonnes).

The word ‘secret’ is partly true. According to the WGC, central banks bought a total of 863 tonnes of gold in 2025. But public data such as the IMF’s showed purchases of only 328 tonnes. The rest is an estimate of buying that is not announced. Poland’s National Bank was the biggest declared buyer, with 102 tonnes. In the second quarter of 2026, central banks’ net purchases were 289 tonnes, 62% more than a year earlier.

But this is not a one-sided story. Reports citing the ECB said that Turkey sold or lent about 130 tonnes of gold in early 2026, one of the biggest reserve reductions in recent years. In the ECB’s survey, two-thirds of central banks cited diversification, and two-fifths cited geopolitical risk, as the reason for buying gold. 80% of reserve managers believe that geopolitics will be an important factor over the next 5 to 10 years.

India is on the same path. The Reserve Bank of India’s gold rose from 794.64 tonnes in September 2025 to 880.52 tonnes by March 2026, and its share in foreign exchange reserves rose from 13.92% to 16.7% (part of the rise in share is due to the higher price of gold).

The reality is this: ‘de-dollarisation’ does not mean the end of the dollar, but the world keeping fewer of its eggs in one basket. The dollar is still the largest reserve.

Stock Markets versus Gold: Balancing risk and safety

Institutional capital rotation

Big investors (funds, insurance companies, pension funds) keep rotating their money between shares and gold according to conditions. If fear rises, rates fall, or the dollar weakens, money moves towards gold. If economic momentum is strong and rates look high, money returns to shares.

In 2025 this rotation was clearly visible. According to the WGC, investment demand for the full year jumped 84% to 2,175 tonnes. Gold-linked ETFs drew 801 tonnes of investment, the second-biggest year on record, and purchases of bars and coins were at a 12-year high of 1,374 tonnes. In the first half of 2026, total world demand was 2,522 tonnes, valued at a record $380 billion, but in the second quarter investment in ETFs, bars and coins slowed somewhat as prices fell.

This relationship is not always ‘shares rise, gold falls’. In August 2026, American shares reached a record high while gold was about 22% below its peak. The real cause is a single force that decides both: interest rates and inflation expectations.

Liquidity squeeze: When gold also falls as shares break

The most surprising thing about gold is that in the initial panic of a market crash, it too gets sold. The reason is simple. Suppose an investor’s shares have fallen 20% and the broker asks for money immediately (a margin call). He does not feel like selling the shares on which he has a loss, so he sells whatever can be sold easily and at a good price. Gold is exactly that.

That is what happened in 2008. From the March 2008 peak to October 2008, gold fell about 30%. But then, between November 2008 and August 2011, it rose by about 170%. The same was repeated in March 2020: there was heavy selling between 9 and 20 March, and according to some reports gold futures saw their biggest one-day falls on two consecutive days, but over the next six months gold recovered by about 30%. And in March 2026, gold saw its biggest monthly fall ($611), although this time the main reason was worry about interest rates.

The lesson: even a ‘safe’ asset can fall in the first weeks of a crisis. For investors who are not forced to sell for cash, such falls have often proved temporary, but that is not a guarantee.

How to read ‘Smart Money’ and market sentiment

‘Smart money’ means the money of large and knowledgeable investors. There are a few public indicators for reading their moves:

• ETF inflows and outflows: The WGC reports every quarter whether money is flowing into or out of gold funds.
• Central bank purchases: WGC and IMF data come out monthly, but with a lag, and some purchases are never declared.
• Real interest rates and Fed expectations: Before a Fed meeting, the market’s forecast (such as CME FedWatch) shows how much of a rise is already “priced in”. Before 16 September 2026, the probability of a rate rise was estimated at over 90%, so the market did not react much to the decision.
• The dollar index and oil: The direction of both hints at gold’s next move.

The effect on the public and changing investment habits

The psychological and financial structure of Indian families

Indian households are believed to hold about 25,000 tonnes of gold, the largest private above-ground stock of any country’s households in the world. Estimates of its value differ: UBS put it at about $2.4 trillion in June 2026, while Jefferies said about $3.9 trillion as of March 2026. According to Jefferies, gold’s share in Indian households’ total wealth rose from 15.4% in March 2023 to 24.2% in March 2026, and this is about four times the value of the shares held by households.

This is not just jewellery; it is also the family’s financial security. Buying for weddings, Akshaya Tritiya and festivals is an old tradition (the WGC report also names these as a prop for demand). But expensive gold has changed habits. According to the WGC, India’s total demand in the April-June quarter of 2026 fell 6% to 131.4 tonnes, and jewellery demand fell 15% to 75.1 tonnes, but the amount of money spent was a record ₹1.98 lakh crore. Spending on jewellery rose 34% to ₹1.13 lakh crore. In other words, people are buying fewer grams but paying more rupees for them. Buyers are moving towards lighter jewellery and lower carats.

The other big matter is loans against gold. According to Jefferies’ estimate, organised gold loans were about $197 billion as of March 2026, up about 73% in two years, and make up about 7% of the total loans of banks and NBFCs. Even so, only about 15% of households’ gold has been used for borrowing.

Recycling and the new economic trend of ‘cashing out’

The common thinking is that when gold becomes expensive, people will sell their old gold to “cash out”. But the figures say otherwise. According to the WGC, in the June 2026 quarter the gold recycled in India fell 17% to 19.2 tonnes. According to the report, families are holding on to their jewellery rather than selling it, a large share of many jewellers’ sales came from exchanging old jewellery, and borrowing against gold kept growing. In other words, the new trend is ‘don’t sell, pledge it or exchange it’.

Government policy also has a big hand in this. Gold is India’s second-largest import, and in the financial year 2025-26 gold imports reached a record $71.98 billion. On 11 May 2026, Prime Minister Narendra Modi appealed to people to put off buying non-essential gold for a year. From 13 May 2026, the government raised the import duty on gold from 6% to 15% (about 18.45% effective duty after adding GST, according to GTRI). The reasons were the rise in oil prices, the weak rupee and the growing import bill.

The result is there to see: according to the WGC, India’s gold imports in the April-June quarter fell 23% to 98.1 tonnes, and total supply, at about 120 tonnes, was at a six-year low, against a 16-year quarterly average of 234 tonnes. The WGC made it clear that this does not mean a shortage of gold in the country, because gold held in homes and recycled gold are meeting demand. Some analysts have warned that the higher duty could bring back the risk of smuggling.

The shift from physical gold to digital and paper assets

Slowly, the habit of putting money into ‘paper gold’ such as gold ETFs, rather than jewellery and coins, is growing. According to the WGC, by the end of June 2026 Indian gold ETFs held 119 tonnes of gold, and their assets were about ₹1.7 lakh crore. According to Jefferies, the assets of these funds rose from $2.8 billion in March 2023 to $18.1 billion by July 2026. In the first half of 2026, ETFs saw a record 24 tonnes of investment, 163% more than a year earlier.

But the picture is not to be exaggerated. In the June 2026 quarter, purchases of physical gold bars and coins (50.3 tonnes, 9% more than last year) were far higher than ETF purchases (4.2 tonnes). In other words, in India, most investment is still in physical gold. Paper gold carries no making charges and no worry about safekeeping, but its price also rises and falls with gold. The choice depends on your needs and your understanding of risk. This is not investment advice.

Which country holds how much Gold?

The world’s largest gold stock lies in the vaults of the United States. America currently holds about 8,133.5 tonnes of gold, more than double that of any other country in the world.

In fact, central banks around the world have made heavy gold purchases continuously over the past year. According to the World Gold Council report, for the past three years global central banks have been adding more than 1,000 tonnes of gold a year to their vaults. According to the latest figures, in the second quarter of 2026 alone, central banks made record net purchases of 289 tonnes of gold, 62% more than in the same period last year.

Among the world’s top five largest official gold reserves (2026), the United States is number one, with 8,133.5 tonnes. In second place is Germany with 3,350.3 tonnes, third is Italy with 2,451.8 tonnes, fourth is France with 2,437.0 tonnes, and fifth is China with 2,346 tonnes (the fastest growth). India comes eighth on this list, with about 880.5 tonnes of official gold at present. However, if the gold held by Indian households is added, it comes to about 25,000 tonnes or even more, which is the most in the world.

Over the past year, the most active buyers have been the central banks of China, Poland, Uzbekistan, Kazakhstan and India.

The future of gold, The long-term verdict

Paper currencies will come and go, governments will change, but gold has preserved its value for thousands of years. From about $388 in 1996 to about $4,150 today, it has risen at roughly 8% a year in dollars and roughly 12% a year in rupees. And the world’s central banks now hold about 27% of their reserves in gold, a trend stronger than ever before.

But the honest picture is also that the journey has not been smooth. From 1996 to 1999 gold fell about 35%, from 2011 to 2015 it fell about 44%, and today it is about 26% below its January 2026 peak. So it is more accurate to regard gold not as something that “rises every year” but as long-term insurance and a tool for diversification. In the coming years, three things will decide gold’s direction: the Fed’s interest rates and inflation; the state of oil and Hormuz; and the world’s trust in the dollar, along with central bank purchases.

Overall, the world’s craze for gold is likely to stay.

Note: The prices and figures in this article are as of the start of October 2026 (roughly 8 to 12 October). Gold, oil and dollar prices change daily, so please read them as approximate. This article is for information only and is not investment advice.