After a spectacular run that pushed prices to record highs, gold may be entering a period of consolidation. However, investors should not mistake the current pause for the end of the precious metal's bull market.
Gold and silver could witness short-term volatility due to changing global economic conditions, but the long-term fundamentals supporting both metals remain firmly in place. Experts advise investors to use price corrections as buying opportunities and accumulate gradually rather than making lump-sum investments.
A Business Standard report, quoting a Tata Mutual Fund gold outlook, expects gold prices to remain volatile in the coming months as markets weigh the impact of higher interest rates, a stronger US dollar and elevated bond yields.
Its outlook suggests gold could move up or down by around 5 percent in the near term, depending largely on geopolitical developments, particularly developments in West Asia and the evolving US-Iran situation.
For Indian investors, however, any decline in global gold prices could be cushioned by a weaker rupee, helping domestic prices remain relatively resilient.
The government has recently increaseed gold import duty from 6 percent to 15 percent.
Gold has become India's second-largest import item after crude oil, with imports estimated at about $72 billion in FY26. At the same time, India continues to import nearly 85 percent of its crude oil requirements.
When oil prices rise, India's demand for dollars increases, putting pressure on the rupee. Every $10 increase in crude oil prices can add $13-14 billion to the country's import bill. With oil imports largely unavoidable, policymakers appear to be targeting gold imports to reduce dollar outflows and ease pressure on the currency.
Tata Mutual Fund's report highlights an important distinction between household gold purchases and central bank buying.
While retail gold purchases increase imports and dollar outflows, the Reserve Bank of India's gold acquisitions are primarily aimed at diversifying foreign exchange reserves.
The trend gained momentum after Western nations froze nearly $300 billion of Russia's foreign exchange reserves in 2022, prompting many countries to reassess reserve management strategies.
India purchased 72.6 tonnes of gold in 2024, making the RBI the world's second-largest central bank gold buyer that year. By 2025, India's gold reserves had risen to around 880 tonnes, with gold's share in foreign exchange reserves increasing from 8.4 percent in mid-2024 to 16.2 percent by early 2026.
Tata Mutual Fund identifies several structural factors that continue to support gold prices:
Strong and rising central bank purchases worldwide
Growing geopolitical uncertainty
High levels of sovereign and corporate debt
Gradual diversification away from the US dollar
Continued demand for safe-haven assets
The recent weakness in prices, the report says, has been driven mainly by a stronger dollar and expectations that US interest rates could remain higher for longer.
The fund house is also positive on silver despite expecting some near-term consolidation. Industrial demand remains the biggest driver. Sectors such as solar energy, electric vehicles, semiconductors and 5G infrastructure continue to consume increasing quantities of silver.
Importantly, 2026 is expected to be the sixth consecutive year in which global silver demand exceeds available supply.
China's growing influence is another major factor. The country accounts for about 11 percent of global silver reserves and controls 60-70 percent of refining capacity. Rising Chinese demand and recent refining restrictions could tighten global supplies and support prices over the long term.
Tata Mutual Fund recommends a staggered investment approach for both metals. For gold, investors should use meaningful corrections to gradually build positions. For silver, investors should be prepared for greater volatility but can consider systematic accumulation given the favourable long-term demand-supply outlook.
The report also notes that the gold-silver ratio has risen above 62 and could move towards 68, indicating that gold may outperform silver in the near term amid heightened global uncertainty.
Disclaimer: This article is for readers' information only; consult your financial advisor before making investment decisions.
