Gold prices have started to go up again. The rise has once again sparked debate over whether the precious metal's upside action represents an early warning of rising global inflation. With spot prices up over 4% in recent sessions, trading near $4,208 per ounce, analysts believe gold's renewed strength reflects the growing concern that economic pressures are building.
According to JM Financial, a sustained uptrend in gold would be suggestive of financial markets readying for a fresh round of inflation. Gold has served as a forward-looking barometer of macroeconomic stress historically. So, this price action may be a precursor of what will only be officially confirmed months later with the release of inflation data.
Hitesh Suvarna of JM Financial adds that there is a compelling relationship, following a notable pattern. When plotting YoY moves in gold along with the average inflation for the US and Europe, the correlation since 2014 is a strong 0.64.
Thus, gold often reflects inflation, often before consumer price indices, since they are always lagging indicators.
Even in turbulent pricing environments, such as after the Global Financial Crisis, gold prices successfully priced both inflationary spurts and deflationary environments.
According to Suvarna, the current rally may represent another such early signal: a potential rise in global inflation over the next two years.
Despite aggressive tariff measures worldwide, the most recent US CPI reading showed limited signs of tariff-driven surges in consumer prices.
US customs duty collections have expanded sharply, up 3.5x in the past six months to reach $30 billion in September 2025, yet the CPI has not fully absorbed this jump.
Analysts argue that tariff pass-through tends to be delayed, taking time to work its way from importers to wholesalers and finally into retail pricing.
Gold, however, may already be responding to this pressure. If the historical correlation holds, the current uptick in gold values could forecast higher inflation over the next 21 months.
Even with easing inflation expectations, structural demand from central banks continues to provide a strong floor for gold prices.
While central bank purchases dipped slightly in 2025 to 634 tonnes from 724 tonnes during the same January-September period last year, total central bank purchases remain much higher than annual purchases that occurred from 2014-2021.
This behavior reflects that central banks continue to be concerned about global uncertainty and prefer to increase their gold allocations to hedge against geopolitical tensions and currency risks.
As a reminder, central banks account for roughly 17% of global gold demand, and their persistent appetite should continue to support higher prices in the near term.
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Another indicator pointing towards increased risk is the price ratio between gold and silver, which is now at approximately 78, well above its long-term average of 68.
A widening price ratio indicates a stronger performance of gold versus silver, which typically indicates a risk-off bid.
The ratio did spike as high as 102 in April 2025 due to uncertainty and a flight to safety, but while it is off those highs, it is primarily due to silver’s much sharper rise of 44% compared to 27% for gold during the same time period.
The current high ratio suggests that investors are still feeling cautious and are reaching for the safer asset, gold, compared to cyclically precious metals.
Long-term projections for gold are still very bullish. Christopher Wood, Global Head of Equity Strategy at Jefferies, expects gold to eventually hit $6,600 per ounce, which would mean a strong upside of 57% from where we are now.
He expects that this would be the ultimate high at the end of this ongoing secular bull market spurred by inflation, geopolitical uncertainty, and falling confidence in fiat currencies.
The recent move higher in gold prices is much more than a typical market fluctuation. Considering the historical correlation with strong central bank purchasing behavior, high levels of risk aversion in the market, and the possibility of tariff related spillover risks, the gold rally appears to be more like a signal of much larger macroeconomic shifts - namely, an earlier pickup in global inflation.
We will see if this plays out over the next year or two, but gold, as usual, appears to be providing an early warning.