The record-breaking gold rally, which began in August 2023 and peaked in January 2026, transformed gold from a traditional safe-haven asset into one of the most closely-watched investments in recent times. Since then, gold prices have fallen around 15 per cent from their peak of Rs 1,76,305 per 10 gm (January 29, 2026) to Rs 1,51,301 as on September 16, 2026.
So as gold prices retreat from their highs now, the question on everyone’s mind is whether this is a buying opportunity or will gold prices fall further.
People are still reposing faith in gold for three reasons. One, it beat equity returns between August 1, 2023 and January 29, 2026. It delivered 197.16 per cent compared to broadly-tracked Nifty’s 29.73 per cent in the period.
3 September 2026
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Two, as equity markets remain volatile amid foreign portfolio outflows and a fluid geopolitical scenario—from the US tariffs to the US-Iran conflict—gold remains at the centre of investors’ imagination for its traditional safe-haven appeal during times of uncertainty.
Says Chintan Haria, head of products and strategy, ICICI Prudential Asset Management: “Gold plays an important role in a portfolio. It is not just an investment for returns, but also for protection. When stock markets fall or when there is uncertainty in the economy, gold prices often move up. This makes gold a good hedge. By adding gold exchange-traded funds (ETFs) to your portfolio, you can reduce overall risk.”
Three, the demand for gold usually picks up during the festive season, which is round the corner, irrespective of the prices.
Let’s break down the reasons—returns, stability and Indians’ affinity for gold—that are supporting the yellow metal’s shine to answer the question posed above.
Where Are Gold Prices Headed?
Gold has weakened over the past months on the back of elevated bond yields and expectations of higher US rates. Now, the US central bank, the Federal Reserve, has hiked interest rates. “The Fed’s 25 basis points (bps) hike from 3.75 per cent to 4 per cent, its first rate increase in three years, has reinforced the near-term headwind through a stronger dollar and higher real yields, while persistent oil-driven inflation keeps the risk of further tightening alive,” says Vikram Dhawan, head commodities and fund manager, Nippon India Mutual Fund.
He adds: “Even though gold continues to receive support from resilient ETF demand and central bank buying, the combination of tighter monetary policy, elevated positioning, geopolitical uncertainty is likely to keep volatility elevated.”
According to data from the World Gold Council (WGC), gold ETFs have seen significant growth. In the first half of 2026, demand for ETFs reached 23.50 tonnes, up 163 per cent from the previous year at nine tonnes. ETF holdings rose to 119 tonnes by June-end (see Gold ETF Inflow), while assets under management (AUM) increased 163 per cent year-on-year (y-o-y) to about Rs 1.70 lakh crore. The shift is more about convenience.
Dhawan, however, cautions investors. “Investors should be prepared for sharper two-way price moves even as the longer-term structural case for precious metals remains supportive.”
But some have a different view. Says Colin Shah, founder and managing director of Kama Jewelry: “There has been about a 20 per cent price correction in international gold rates since the start of this year. Indian prices have been hovering a little higher, given the rise in duty on gold imports and depreciation in rupee due to geopolitical tension.”
He says gold is right now in a “safe-but-volatile” phase, as it remains resilient amid strong economic headwinds. “This positioning of gold prices will only gain more muscle as we near the peak of the Indian festive season, along with the international holiday season,” Shah adds.
Demand To Continue
For generations, gold has been as much a cultural asset as a financial one in India. It has adorned brides, been bought during festivals, passed down to children and quietly kept aside for a rainy day. That emotional and financial attachment has created a remarkable stockpile for Indian households, who form the world’s biggest private holders of gold.
According to The Swarnim Udaan 2047 report, released by WGG in August 2026, Indian households currently hold an estimated 31,000 tonnes of gold, valued at approximately Rs 314.90 lakh crore ($3.40 trillion). The report said that monetising even 1 per cent of this idle stock annually could substitute gold imports worth around Rs 3.10 lakh crore (US$34 billion), reduce import dependence, and unlock significant domestic economic value.
According to data from WGC, the demand for gold ETFs reached 23.50 tonnes in H1 2026, up by 163 per cent, from 9 tonnes the previous year
Yet the demand for gold is likely to continue for various reasons.
Affinity To Jewellery Still Strong: Despite the rise in gold ETF numbers, jewellery still dominates the demand in terms of volume. During the first half of 2026, jewellery demand fell 17.10 per cent y-o-y to 141.20 tonnes from 170.40 tonnes, still higher than 119 tonnes for gold ETFs. At the same time, demand for bars and coins jumped 21.30 per cent from 92.80 tonnes to 112.50 tonnes.
Higher Prices Don’t Have An Impact: A deeper look at the data shows that higher gold prices affected the demand for jewellery, but did not diminish the overall appetite. In 2025, Indian jewellery demand fell 24 per cent to 430.50 tonnes, from 563.40 tonnes a year earlier, as gold prices surged. Yet the value of jewellery demand rose sharply, with annual spending reaching a record $49 billion, according to the WGC report. This means consumers bought less gold, but spent more money on it.
The WGC’s consumer research report in May-June 2026 found that high prices were encouraging smaller and less frequent jewellery purchases, while exchange offers, savings schemes and equated monthly instalment (EMI) schemes were helping sustain demand.
Consumers are buying lighter pieces, choosing lower-karat jewellery and increasingly using old gold to fund new purchases.
Demand Rises In Second Half: Historical data proves that demand for gold increases during the festive season. For instance, in the first half of 2025, the demand for gold was 276.70 tonnes, which rose to 491.70 tonnes in the second half. This trend is likely to continue.
“Gold trade deficit narrowed, but that may not linger for long as the festive season starts,” Pranjul Bhandari, chief India economist, HSBC, wrote in a report titled India Trade Deficit, dated September 17, 2026.
Experts believe that from a macro perspective, de-globalisation and geopolitical disruptions are creating new sources of demand for commodities. Says Rahul Singh, CIO-Equities, Tata Asset Management: “For gold and silver, the key driver remains the global macro around the dollar. Gold continues to attract demand from central banks, ETFs and retail investors, and we remain directionally positive on gold.”
Things To Consider
As the festive season kicks in, gold buyers will likely rush in, irrespective of prices. The ones who treat it more as an asset would wonder: buy now or wait for prices to fall? Both sets of buyers should consider the following.
Don’t Substitute Equities For Gold: Experts say while gold can provide diversification and hedge against certain risks, equities remain an important source of long-term wealth creation. The question is not gold versus stocks, but how much of each belongs in a portfolio, and whether the recent correction in gold changes that equation.
Says Haria: “It is important to understand that gold does not give regular income. Unlike stocks or fixed deposits (FDs), it does not pay dividends or interest. Your returns depend only on price movement. So, gold should not be your main investment, but a supporting one.”
Gold should constitute 5-15 per cent of your portfolio. You may also consider adding silver as its demand is driven by industrial applications, too
Don’t Forget Taxation: Under existing rules, physical gold is treated as a capital asset. If held for 24 months or less, gains are treated as short-term capital gains and taxed at the applicable slab rate. If held for more than 24 months, they qualify as long-term capital gains and are taxed at 12.50 per cent, without indexation.
Gold ETFs and gold mutual funds have a shorter long-term threshold: gains after a holding period of more than 12 months are taxed at 12.50 per cent, while short-term gains are taxed at the applicable slab rates.
Stick To Your Allocation: Experts say gold should be used as a portfolio diversifier, and not as an investment to reach your financial goals. Gold has provided downside protection in many years when equity has delivered negative returns and vice-versa (see Gold vs Equity). Different asset classes have varied degrees of correlation with each other, and it is difficult to spot the winning asset classes, so it’s better to have a diversified portfolio across asset classes.
Ideally, gold should constitute 5-15 per cent of your portfolio. If the current allocation of gold in your overall portfolios has decreased due to the fall in gold price, you may consider realigning it by investing more.
Consider Other Metals: If you have enough gold in your portfolio, but festive traditions are pulling you to add more, you may consider other metals like silver. Silver can complement gold because its demand is driven not only by investment and jewellery, but also by industrial applications, including electronics, solar panels, and electric vehicles. Do note that silver is typically more volatile than gold. You can also invest in silver through ETFs, and silver mutual fund schemes.
kundan@outlookindia.com
