As gold prices hit record highs, what history says about what happens next

As the gold rally continues with prices breaking record highs, here's a look at similar historical examples where gold surged, what caused that surge and what happened after

Gold prices continue to surge relentlessly, showing no signs of cooling. On Monday (October 13), gold futures on the Multi Commodity Exchange (MCX) climbed 1.62 per cent to ₹1,23,313 per 10 grams — a new all-time high in Indian markets. Internationally, bullion crossed the unprecedented $4,100 per ounce mark. The rally has reignited public fascination with the yellow metal, leaving investors, jewellers, and economists alike asking: what’s fuelling this surge, and how long can it endure?

 

What stands out the most is that gold’s most recent $1,000 surge happened in barely 207 days. While it took close to 15 years for gold to move from $1,000 to $2,000, the next leap was far quicker, another $1,000 rise that pushed the price to $3,000 within just 14 months (by mid-March 2025). And since March, it has jumped another $1,000.

 

And this is not the first time gold has been rallying. There have been other moments in history too when gold glittered this brightly, a direct comparison being in the 1979-80 period, while a similar surge occurred during the Great Depression of the 1930s. Both periods witnessed massive price surges.

 

Why is gold rallying so sharply? 

Gold’s recent surge is being attributed to a number of factors including global uncertainties, monetary expectations, and domestic currency weakness.

 

Since 2022, a series of global conflicts, from Russia’s invasion of Ukraine to rising China-Taiwan and US-China tensions, along with the prolonged Israel-Hamas war, has shaken financial stability worldwide. Amid this turmoil, gold has re-emerged as a preferred safe haven.

 

Central banks have led the charge, and sharply increased their bullion holdings in recent years. As per the World Gold Council data, they bought 1,082 tonnes in 2022, 1,037 tonnes in 2023, and a record 1,180 tonnes in 2024, which is more than double the earlier annual average of about 500 tonnes. Many also began shifting their reserves from the Bank of England’s vaults to domestic facilities, reflecting a push for financial sovereignty. For example, India alone repatriated about 214 metric tonnes between 2022 and 2024.

 

Additionally, gold’s rally is also tied to the US dollar’s weakness. The dollar index, which tracks its strength against six major currencies, has dropped nearly 10 per cent in 2025, driving investors away from dollar-based assets. The decline stems from Trump’s tariff policies, which have strained global trade, and America’s swelling debt load. His proposed “One big, beautiful bill” could add over $3.9 trillion to US debt. With fiscal deficits widening, Moody’s has already downgraded the US credit rating, further fuelling gold’s appeal as a safe, long-term asset.

 

When did gold surge like this before?

  This is not the first time gold has gone on a spectacular run. Two earlier periods stand out in history, the first being the bull run of 1979-80 and then the surge of the 1930s.

 

Between 1978 and early 1980, global gold prices quadrupled from around $200 to over $850 an ounce. The drivers were a volatile mix of double-digit inflation, oil shocks, and geopolitical crises including the Iranian Revolution and the Soviet invasion of Afghanistan.

 

In India, though import controls were strict under the Gold Control Act, domestic prices still mirrored the international trend. Historical data show that the price of 24-carat gold rose from ₹937 per 10 grams in 1979 to ₹1,330 in 1980, marking a surge of nearly 45 per cent.

 

But once US Federal Reserve Chairman Paul Volcker sharply raised interest rates to tame inflation (famously known as the Volcker shock), gold’s glory faded. By 1982, prices had fallen by more than 50 per cent from their peaks. For nearly two decades, gold languished in a bear market, trading sideways until the early 2000s.

 

Great Depression of the 1930s 

During the Great Depression, the world faced banking collapses and deflation. In 1933, US President Franklin D Roosevelt banned private gold ownership and in 1934 revalued gold from $20.67 to $35 per ounce under the Gold Reserve Act. This policy shift instantly raised the official gold price by about 70 per cent, one of the largest jumps in history.

 

Though this rise was largely administrative, not market-driven, it showed how monetary policy and fear of currency devaluation could alter gold’s fortunes overnight. Prices remained stable for decades afterward under the Bretton Woods system, until gold was fully liberalised in 1971.

 

Will history repeat itself? 

History suggests that gold’s biggest rallies often coincide with fear, inflation, and uncertainty and they tend to cool once stability and higher interest rates return.

 

The 1930s surge was policy-driven while the 1980 boom was mainly inflation-driven. Today’s rally combines both elements of policy uncertainty and global fear. But unlike in the past, central banks themselves are now among the largest buyers of gold. The Reserve Bank of India, for instance, has steadily increased its gold reserves to over 850 tonnes, diversifying away from dollar assets.

 

That steady institutional demand may act as a pillar for prices even if speculative sentiment cools. Yet, analysts warn that if inflation falls sharply and real rates rise, gold could face a correction similar to 1980.