Are We Quietly Returning to the Gold Standard?

Today’s Market Update

The markets today were quite dull and slow, almost in a sulky mood. There was no major upswing anywhere, and it felt like the rally in precious metals was casting a shadow on the equity markets.

Many people are now saying that the sharp rise in gold and silver prices could be an early warning sign that something might go wrong.

That said, the market was only a bit lower than yesterday, not too bad, but there was no strong positive push either.

• The Nifty was down 0.25%, showing that we are stuck in a range.

• The Nifty Junior was down 0.77%, midcaps were down 0.73%, and smallcaps fell 0.54%. For the last three days, smallcaps haven’t been able to rise at all.

• Nifty Bank was down 0.39%, so there were no major gains anywhere—except for gold.

• Gold was up 1.73% today, trading around ₹12,252 per gram or ₹1,22,525 per 10 grams, which is the more common way people look at it. If you see the trend from the end of August, it’s been just one and a half months, and gold has jumped from ₹98,000 to ₹1,22,000 per 10 grams—a gain of almost 25% in just six weeks.

Other Market Triggers

• IT stocks managed to hold up well. TCS and Infosys were up between 1.8% and 2.5%.

• Titan also gained as gold prices surged. The company’s quarterly results came out strong, which was contrary to many expectations, and that pushed the stock up by 4.3%.

• On the other hand, Reliance was down 1.2%, and auto stocks like Mahindra & Mahindra, Maruti, and Tata Motors also fell. UltraTech Cement, JSW, Sun Pharma, BEL, and NTPC were all lower, while Bharti Airtel gained 0.75%.

• The Nifty Next 50 index was full of red. Stocks like ABB, Gail, Adani Power, DLF, and LIC were all slipping. Pidilite, BPCL, LTIM, and Eicher Motors managed small gains, but overall, things were weak.

• The standout mover was ITI, a PSU telecom company, which has gained 20% in a week as BSNL speeds up its 5G rollout.

U.S. Market Update

• In the US, markets were down slightly. Smallcaps fell 1.12%, Nasdaq dropped 0.67%, and the S&P 500 was down 0.38%. But on a 12-month basis, they are still doing very well. The S&P 500 is up 16.75%, and the Nasdaq has gained 25.3%—much stronger than Indian markets.

• Among individual US stocks, Tesla was down 4.4%, Booking Holdings fell 3%, Nike dropped 3%, Texas Instruments was down 2.6%, and Oracle also slipped 2.5%.

What to watch next ?

• Historically, whenever gold and silver have moved up at such a fast pace, it has often been followed by some kind of financial disaster or recession, especially in the US.

• So, this trend is not looking very good for the equity markets, and there is some uncertainty about what could trigger a deeper sell-off.

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What To Read This Week ?

The Great Monetary Pivot: Central Banks Shun Treasuries for Gold

A Tectonic Shift in Central Bank Strategy

A significant change in global monetary policy, a true "tectonic shift," is unfolding right before our eyes, though its gradual nature often obscures its magnitude. The pivot began in 2013 when the Central Bank of China declared a strategic disinterest in further growing its USD foreign exchange reserves. This decision signaled a major recalibration away from the U.S. dollar as the preferred reserve asset.

The Data: Treasuries Out, Gold In

• US Treasuries (Red Line in the above chart): Since 2013, the net purchase of US Treasuries by central banks globally has been virtually zero. This represents a dramatic decline in demand for the long-standing bedrock of the dollar-based global reserve system.

• Gold Accumulation (Blue Line): In stark contrast, central banks have engaged in a "humongous" buying spree of gold. Over the past 12 years (since 2013), they have collectively purchased nearly $900 billion worth of gold.

This clear divergence—a shunning of dollar-denominated debt (Treasuries) coupled with aggressive accumulation of the precious metal (gold)—reveals the direction of global liquidity and, more importantly, the long-term strategic outlook of central monetary authorities.

Forecasting the Dominant Reserve

The sustained, large-scale flow of liquidity into gold strongly suggests a consensus among central banks on the future dominant monetary reserve. Their actions indicate a belief that gold will become the preferred store of value and reserve asset in the coming 5, 10, or 20 years, supplanting the current dollar-based system.

This historic period, which is shifting the global financial structure away from the dollar-based system, will likely be a major chapter in future economic history books.

Actionable Insight for Your Portfolio

If the world's central banks are positioning themselves for a future where gold plays a much larger role, individual investors should heed this signal. The current typical allocation of 1%, 2%, 5%, or even 10% to gold in retail portfolios may be insufficient given the fundamental re-rating of the asset by state actors.

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