Is the gold price rally trying to warn against a rise in inflation?

Gold prices have started to inch up again, gaining over 4 per cent to around $4,208 an ounce (oz) in the international markets. The rise, according to analysts at JM Financial, could indicate that the markets are expecting a rise in inflationary pressures going ahead, which is prompting investors to stock up on gold as a safe-haven.

 

"Our assessment of the relationship between movements in gold prices with inflation revealed that gold prices tend to anticipate global inflationary pressures," wrote Hitesh Suvarna, an analyst at JM Financial tracking gold in a recent report.

 

For this, Suvarna mapped average inflation in the US and the EU with gold price movement on year-on-year (YoY) basis with a lag of 21 months. This relationship, he said, has a correlation as strong as 0.64 (since 2014), clearly demonstrating that gold can be considered as a good lead indicator for anticipating global inflation trajectory.  

 

“Even during the heightened uncertainty post the global financial crisis (GFC), gold prices accurately predicted the upcoming inflationary and deflationary phases in the immediate near term. Based on this assessment it would be safe to assume that the rally in gold is in anticipation of a pick-up in inflationary pressure globally in the near term,” Suvarna said.

 

The latest CPI print in the US, the report said, lacks specific signals of a meaningful impact of heightened tariffs imposed globally. This is despite the 3.5-times increase in US custom duty collection in the last six months to $30 billion in September 2025.  

 

 

"The gradual pass-through in the system is said to have delayed the impact of tariffs on the CPI print; however, the rally in gold prices may be signaling an uptick in inflationary pressure in the upcoming 21 months, as per this relationship," Suvarna suggests.

 

Gold price outlook

 

Gold prices, meanwhile, are expected to stay elevated as central banks continue to stock up on the yellow metal amid uncertainty. 

 

After piling up gold for three consecutive years (2022-2024), central banks have marginally moderated their gold purchases in 2025 to 634 tonnes (January-September 2025) versus 724 tonnes during the previous corresponding period, data shows. 

 

That said, central bank demand continues to be strong, analysts believe, which is evident from the fact that gold purchases in the first three quarters of 2025 exceed annual gold purchases during 2014-2021.

 

"Considering that central bank purchase forms a large chunk (around 17 per cent) of total gold demand, we believe that the sustenance of central bank demand will prevent a steep decline in gold prices in the near term," analysts at JM Financial said. 

 

The gold-silver ratio (currently near 78 levels) is well above its long-term average of around 68, indicating gold’s strong outperformance over silver, analysts said. This ratio peaked at 102 in April 2025; the moderation till now is mainly on the back of a steeper rally in silver (44 per cent) relative to gold’s 27 per cent gain since then. 

 

"This elevated ratio reflects heightened risk aversion and global uncertainty, with investors favouring gold’s safe-haven status amid geopolitical tensions and slowing global growth," Suvarna said.

 

Based on the latest data on US disposable income per capita, Christopher Wood, global head of equity strategy at Jefferies expects gold prices to hit $6,600/oz going ahead (up 57 per cent from the current levels), which he believes will be the peak of the current secular bull market in the yellow metal.