Summary of this article
Gold’s strong 2025 rally may face corrections and volatility ahead.
Axis MF cites rate cuts, dollar weakness and global risks as key drivers.
Higher yields, stronger dollar and profit-taking could slow gold’s momentum.
Gold has been one of the standout asset classes in 2025, delivering an exceptional rally of nearly 60 per cent. The move has been fuelled by a powerful combination of falling opportunity costs, rising demand for safe haven assets, and sustained buying of gold by both central banks and investors.
Though many of these pillars remain intact, investors should nevertheless prepare for periods of consolidation and heightened volatility in 2026, according to the Gold Outlook and Trends report by Axis Mutual Fund.
The report said: “With expectations of a softer interest rate path in the US, the non-yielding metal has enjoyed strong support. The fund house still anticipates 1-2 more rate cuts in the current cycle as economic conditions remain uneven and labour-market weaknesses linger.”
The report also highlighted concerns around the US Federal Reserve’s independence. “If the next Fed Chair is seen as more aligned with Trump’s policy preferences, markets could expect a more dovish monetary stance. This would further strengthen gold,” the report added.
A weaker US dollar has also played a major role.
With America’s debt-to-gross domestic product (GDP) at 124 per cent, questions around fiscal sustainability have pushed the dollar lower, down about 8 per cent so far this year. This depreciation has naturally worked in favour of gold prices.
Global uncertainty has only amplified gold’s appeal. Sticky inflation, slowing growth, and geopolitical risk (from the Russia-Ukraine conflict to Middle East tensions), have kept investors firmly towards safe haven assets. Trade and tariff worries have also added another layer of caution.
According to the report, even developments in Japan, including rising JGB yields, the end of yield-curve control, and the unwinding of the yen carry trade, have contributed to broader risk aversion.
Demand dynamics have been equally compelling. Central banks continue to diversify away from the dollar, boosting their gold reserves. Notably, gold’s share in central bank reserves has overtaken that of US Treasuries for the first time in nearly 30 years. Investment demand has remained strong as well, with gold-backed exchange-traded funds (ETFs) touching record assets of around $470 billion, and bars and coins witnessing three consecutive quarters of demand above 300 tonnes.
2026 Gold Outlook for Investors
The report says that investors should be mindful of potential headwinds: higher real yields, a stronger dollar, easing inflation, firmer global growth, and a more hawkish US policy outlook.
“Profit-taking, weaker ETF inflows and reduced geopolitical flare-ups could also temper momentum,” says the report.
Overall, while gold retains long-term structural support, the coming year may bring intermittent corrections and volatility. “As always, gold remains an effective diversifier, and a strategic component of any well-balanced portfolio,” the report further says.
