Visvalingam Muralithas
Gold has long been a reliable indicator of global economic confidence. While its value remained relatively stable for over a century, the precious metal has also seen dramatic surges in response to global crises, economic shifts, and changing monetary systems. Here’s a closer look at the historical trajectory of gold prices and the key moments that shaped its remarkable rise.
A Century of Stability: 1833–1933
Between 1833 and 1933, gold prices remained remarkably stable, fluctuating between $18.93 and $20.69 per troy ounce. This extended period of price stability was largely due to the gold standard, a monetary system that directly linked currency values to gold, limiting price fluctuations. In 1834, gold was officially fixed at $20.67 per ounce—a rate that remained virtually unchanged for nearly 100 years, promoting economic stability and predictability across global markets.
Revaluation and the Bretton Woods Era: 1934–1970
The Great Depression in the 1930s prompted a major shift in gold pricing. In 1934, under President Franklin D. Roosevelt, the U.S. government raised the official price of gold to $35 per ounce to combat economic hardship. This price remained fixed under the Bretton Woods system, a framework that established fixed exchange rates between currencies and gold, until the early 1970s.
Post-Bretton Woods Surge: 1971–1980
The collapse of the Bretton Woods system in 1971 marked a pivotal moment in the history of gold. Freed from its fixed price, gold prices soared, reaching a peak of $615 per ounce in 1980. This dramatic rise was driven by inflation, oil crises, and geopolitical instability, which heightened gold’s appeal as a safe-haven asset during uncertain times.
Price Moderation: 1981–2000
After the explosive growth of the 1970s, gold prices entered a period of relative moderation between 1981 and 2000. During these decades, prices ranged from $270 to $450 per ounce, supported by reduced inflation, a strong global economy, and growing confidence in the U.S. dollar. Gold took a backseat to equities and other investment vehicles during this period, which saw a more stable economic environment.
Modern Bull Market: 2001–2012
The early 2000s saw gold re-emerge as a critical asset for investors, driven by geopolitical uncertainties like the 9/11 attacks, the 2008 global financial crisis, and expansive monetary policies. As a result, gold prices steadily climbed, reaching a record average of $1,668.98 per ounce in 2012. Investors turned to gold as a safe-haven amid widespread economic volatility and a weaker U.S. dollar.
Recent Rally: 2013–2025
Following a brief price correction in the mid-2010s, gold prices began climbing again, driven by a series of global shocks such as the COVID-19 pandemic, rising inflation, geopolitical tensions, and central bank gold purchases. By April 2025, gold reached historic highs, surpassing $3,375 per ounce—marking a more than 25% rise year-to-date. This surge has underscored gold’s enduring role as a store of value during times of crisis.
Gold Price Trend in Sri Lanka (2025)
In Sri Lanka, the price of gold has been influenced by a mix of global price movements and local economic conditions, including fluctuations in the exchange rate between the Sri Lankan Rupee (LKR) and the U.S. Dollar (USD).
Recent Price Movements:
The gold price trend (per 8g or one pound)
General Trend:
- Gold prices have shown a steady upward trend over the past year.
- On April 22, 2024, the price of 8g gold was LKR 179,372.86.
- By April 21, 2025, it had risen to LKR 252,938.62, marking an approximate 41% increase over the year.
Highlights - Lowest price during this period: 🔻 LKR 170,695.90 on May 3, 2024
- Highest price recorded: 🔺 LKR 259,009.00 on April 21, 2025
Monthly Averages (Select Months): - July 2024 average: ~LKR 182,000
- October 2024 average: LKR 198,000
- January 2025 average: LKR 202,000
- April 2025 (so far): LKR 247,000
The gold price changes for 8 grams (one pound) of gold
Date
Price (LKR)
Apr 21, 2025
252,938.62
Apr 4, 2025
230,517.30
Mar 25, 2025
223,293.86
Mar 12, 2025
215,521.36
Oct 28, 2024
200,763.13
Jul 25, 2024
180,449.68
Apr 25, 2024
173,248.24
Source: CBSL, https://www.cbsl.gov.lk/en/rates-and-indicators/exchange-rates/daily-gold-rates - As of April 21, 2025, the price of gold in Sri Lanka was LKR 1,011,754.49 per troy ounce.
- Gold prices have seen a steady rise over recent weeks, fluctuating between LKR 900,000 to LKR 1,000,000 per troy ounce.
o April 2025: A noticeable rise in prices to over LKR 1,000,000 per troy ounce.
o March 2025: Prices ranged between LKR 890,000 and LKR 900,000.
o February 2025: Gold prices were between LKR 850,000 and LKR 860,000.
Influencing Factors:
- Global Gold Prices: The international gold market plays a significant role in determining Sri Lanka’s local gold prices. Fluctuations in global demand and market conditions directly influence Sri Lanka’s gold market.
- Exchange Rate: The strength of the USD against the LKR is another important factor. A stronger dollar generally leads to higher gold prices in Sri Lankan Rupees, while a stronger Rupee may lower the prices.
- Local Demand: Demand for gold, particularly in Sri Lanka’s jewelry market, also impacts local prices.
Impact on Sri Lanka:
- Gold Imports and Trade Balance: As an island nation that imports much of its gold, Sri Lanka could experience a widening trade deficit due to the rising cost of gold imports. The country’s current account balance, which is already under pressure, could deteriorate further, increasing Sri Lanka’s reliance on foreign reserves to meet its trade obligations.
- Remittances and Gold Exports: Sri Lanka’s large diaspora plays a key role in sending remittances back to the country. As the price of gold rises, expatriates may see an increase in the value of gold-based gifts and investments sent home. Additionally, Sri Lanka’s gold exports, particularly jewelry, could benefit from higher global gold prices, though this will depend on local production capacity and demand.
- Central Bank Reserves: The Sri Lankan Central Bank may consider increasing its gold reserves in light of rising prices. While the country’s reserves have been under strain, adding gold could help diversify its asset base and provide a hedge against currency risk and financial instability.
- Inflationary Pressure: Rising gold prices can lead to inflationary pressures, especially for consumers purchasing gold jewelry. This affects both consumers and businesses in the gold industry.
- Investment Sentiment: Gold, often regarded as a safe-haven asset, sees a spike in demand during times of uncertainty. This has significant implications for investors looking for stability amidst economic instability.
Reasons Behind the Surge in Gold Prices
Several factors have contributed to the remarkable rise in gold prices this year:
- Geopolitical Tensions: Geopolitical instability is a key driver behind the growing demand for gold as a safe-haven asset. Trade wars, particularly U.S. tariff policies under President Trump, ongoing conflicts in the Middle East, and heightened geopolitical risks have led investors to flock to gold. Gold is traditionally seen as a stable asset that maintains its value during periods of uncertainty, making it a go-to investment in times of global tension.
- Inflation Concerns: Rising inflation fears have also fueled the surge in gold prices. Supply chain disruptions, increased commodity prices, and higher raw material costs are pushing the cost of living up globally. Since gold has long been regarded as a hedge against inflation, investors are increasingly turning to it to protect their purchasing power against the eroding effects of rising prices.
- Weakening U.S. Dollar: The U.S. dollar has faced downward pressure in 2025, primarily due to potential interest rate cuts and slowing economic growth in the U.S. As gold typically has an inverse relationship with the dollar, the weakening greenback has made gold more attractive. When the dollar weakens, gold becomes more affordable for non-dollar investors, driving up its price.
- Central Bank Purchases: Central banks worldwide, particularly those in emerging economies such as China, India, and Turkey, have been actively increasing their gold reserves. These countries see gold as a strategic asset to diversify away from U.S. dollar-denominated assets and reduce exposure to currency risk, further boosting demand.
Impact on the World Economy - Investor Sentiment and Risk Appetite: Gold’s surge is often a reflection of increased investor caution. Rising gold prices usually signal that investors are concerned about potential economic slowdowns, geopolitical instability, or financial crises. This shift in sentiment can dampen risk appetite, pushing investors away from riskier assets like stocks and bonds. As a result, equity markets may experience increased volatility.
- Inflation Hedging: As inflation concerns rise globally, gold’s role as a hedge against inflation has become even more pronounced. Countries experiencing higher inflation are likely to see gold become a more attractive asset, not just for individual investors but also for institutional investors and central banks looking to preserve purchasing power.
- Impact on Commodity Prices: Gold’s price surge can influence other commodity markets as well. Mining companies may experience increased revenues as the value of gold rises, which could help stabilize economies dependent on resource extraction. However, industries reliant on gold consumption, such as jewelry, electronics, and manufacturing, may face higher production costs, which could be passed on to consumers.
- Potential for Economic Slowdown: While the rise in gold prices can indicate a flight to safety, it can also signal broader concerns over economic growth. Higher gold prices may reflect fears of a recession or economic stagnation. If the global economy faces a downturn, central banks may loosen monetary policy, which could weaken the dollar and drive up inflation, further boosting gold prices.
Impact on the Sri Lanka Stock Market and Colombo Stock Exchange (CSE) - Flight to Safe Assets: With growing uncertainty in global markets, local investors may shift some of their portfolio allocations to gold or gold-related assets. This shift could lead to capital outflows from riskier assets, such as equities. The Colombo Stock Exchange (CSE) may experience lower trading volumes or a decline in stock prices as investors opt for safer, more stable investments like gold.
- Gold Mining and Export Companies: Companies involved in gold mining, processing, or exports could see positive impacts from the surge in gold prices. These companies may benefit from increased revenues and profits due to the rising value of gold. Investors may look to these sectors as potential beneficiaries, boosting their market capitalization.
- Currency Depreciation: If the Sri Lankan Rupee (LKR) continues to depreciate due to external pressures or an increased trade deficit, the rising price of gold could amplify inflationary trends. This would further reduce the purchasing power of local consumers and increase operational costs for businesses.
- Investor Confidence: The overall volatility in both global and local markets could hurt investor sentiment. Like other global stock markets, the CSE may witness increased fluctuations, with stock prices reacting to rising gold prices and the associated uncertainties. This could lead to a more cautious approach from both local and foreign investors, affecting market liquidity and stock performance.
The surge in gold prices in 2025 has significant and wide-ranging impacts, not only for the global economy but also for countries like Sri Lanka. Gold’s rise reflects heightened global uncertainty, inflation concerns, and shifts in investor sentiment. While it serves as a hedge against economic instability, its effects on the Sri Lankan economy—especially inflation, trade balances, and the stock market—could be profound. As global economic conditions remain turbulent, gold’s role in shaping investment decisions and economic strategies will continue to be pivotal both globally and within Sri Lanka.
Gold at a Glance: Current Price, Impact, and Key Drivers
- Current Price: ~$3,375 per ounce
As of April 2025, gold has reached an all-time high of approximately $3,375 per ounce, marking a 25% increase year-to-date. This sharp rise reflects the growing demand for safe-haven assets in response to global uncertainty.
Impact on the Market:
Gold’s record-breaking price is having significant repercussions across financial markets and economies. For investors, it offers a secure store of value during volatile periods, especially amid geopolitical tensions and fears of economic instability. Central banks have also been increasing their gold reserves, recognizing its importance in diversifying foreign exchange holdings and reducing risks associated with currency fluctuations and inflation.
However, the rise in gold prices may raise costs for industries that rely on the metal, such as electronics and jewelry. Additionally, it could amplify concerns about inflation, particularly if disruptions in global trade persist.
Key Drivers Behind the Surge:
- Geopolitical Tensions: Ongoing global instability, including trade conflicts and geopolitical risks, has led investors to seek gold as a safe-haven asset. In times of political uncertainty, gold becomes increasingly attractive as a stable investment.
- Tariff Uncertainty: The U.S. President’s tariff policies have fueled concerns over inflation and economic slowdowns, prompting investors to flock to gold in search of stability.
- Inflation Fears: Rising inflation concerns, due to factors like higher raw material costs and sluggish economic growth, have boosted demand for gold, which is seen as an effective hedge against inflation.
- Weakening U.S. Dollar: A weaker U.S. dollar, often caused by low interest rates or uncertainty around U.S. economic policies, tends to increase gold prices. When the dollar depreciates, gold becomes more affordable for international buyers, further driving demand.
- Central Bank Demand: Countries such as China and India have been ramping up their gold reserves, a trend that contributes to the continued rise in gold prices.
In conclusion, gold’s meteoric rise reflects a broader global narrative of economic uncertainty and geopolitical risks. Investors continue to view gold as a reliable asset, while central banks prioritize it as a safeguard against financial instability. However, the impact of gold’s surge on industries and the broader market remains uncertain, especially if the price rally persists.
Gold at a Glance: 2025 YTD Performance, Investment Drivers, and Impact on the Stock Market
- Current Price: ~$3,375 per ounce
- 2025 Year-to-Date (YTD) Performance: +25%
As of April 2025, gold has reached a historic high of about $3,375 per ounce, reflecting a 25% increase so far this year. This surge indicates significant demand for gold, driven by a variety of global economic factors.
Key Reasons Behind Gold’s Surge:
- Geopolitical Tensions: Heightened global instability, fueled by trade disputes, military conflicts, and diplomatic uncertainties, has prompted investors to flock to gold as a safe-haven asset. Gold is seen as a hedge against geopolitical risks.
- Tariff Uncertainty: The unpredictability surrounding U.S. tariff policies, particularly under President Trump’s administration, has spurred concerns about inflation, slowing economic growth, and global disruptions, driving more investors toward gold.
- Inflation Fears: Rising inflation, driven by supply chain disruptions and increased commodity prices, has made gold an appealing hedge. Historically, gold tends to appreciate when the cost of living rises.
- Weak U.S. Dollar: A softer U.S. dollar has supported gold prices, as the precious metal becomes more affordable for international buyers. Ongoing discussions around U.S. interest rates and economic activity contribute to the dollar’s weakness.
- Central Bank Buying: Central banks, particularly in emerging markets like China, India, and Turkey, have been significantly increasing their gold reserves, further fueling the rise in gold prices.
Gold as an Investment in 2025:
Gold’s strong YTD performance has led investors to increase their exposure to the precious metal. As a safe-haven asset, gold is seen as an attractive investment during periods of market turbulence, low interest rates, or currency depreciation. Additionally, its role as an inflation hedge makes it particularly appealing in the current economic environment.
Investors can gain exposure to gold through physical forms like bullion and coins, as well as via gold exchange-traded funds (ETFs), mining stocks, or futures contracts. Institutional investors are also diversifying their portfolios with increased gold allocations, emphasizing its growing importance in risk management and wealth preservation.
Impact of Gold on the Stock Market: - Inverse Relationship with Risk Assets: Historically, gold has an inverse relationship with riskier assets like stocks. When equities face volatility, investors often turn to gold for safety. This rise in gold prices could signal potential declines or stagnation in the stock market.
- Flight to Safety: As gold prices climb, stock markets may experience downward pressure, particularly in sectors impacted by rising costs, such as consumer goods and energy. Investors may shift their funds from equities to safer assets like gold, decreasing overall market liquidity.
- Impact on Corporate Earnings: Rising gold prices could benefit companies involved in gold extraction, as mining stocks typically perform well when gold prices are high. Conversely, industries reliant on gold for manufacturing, such as electronics and jewelry, may see higher input costs, negatively impacting profit margins.
- Inflation Hedge in Stock Portfolios: For long-term investors, gold’s strong performance in 2025 highlights the importance of portfolio diversification. As a hedge against potential economic downturns and stock market volatility, gold can play a crucial role in risk management.
Gold’s remarkable 25% rise in 2025 showcases its role as a key asset amid global uncertainty, inflation fears, and currency depreciation. As geopolitical tensions, trade disputes, and inflationary pressures continue to shape the economic landscape, gold’s appeal remains strong. The surge in gold prices could dampen investor sentiment in riskier assets, particularly stocks, while increasing demand for gold-related investments. For investors, gold continues to be an essential tool for diversification and protection against market volatility.
Writer
Visvalingam Muralithas is a researcher in the legislative sector, specializing in policy analysis and economic research. He is currently undertaking a PhD in Economics at the University of Colombo, with a research focus on governance, development, and sustainable growth. He holds a Bachelor of Arts in Economics (Honours) from the University of Jaffna (2001) and a Master’s in Economics from the University of Colombo (2006). His academic background is further complemented by postgraduate diplomas in Education (Open University of Sri Lanka, 2012) and Monitoring & Evaluation (University of Sri Jayewardenepura, 2021). Since 2009, Muralithas has also contributed to academia, teaching economics at the University of Colombo and the Institute of Bankers of Sri Lanka (IBSL).
📧 Email: muralithas.v@gmail.com
