Is gold losing its shine as a safe haven asset? After its record breaking rising spree in 2025 to early 2026 when it hit record highs, gold prices have been on a downward spiral. In the face of geopolitical and economic uncertainty, the popular safe haven asset has crashed.Predicted to touch Rs 2 lakh per 10 grams level, will gold now hit Rs 1..25 lakh, or even Rs 1 lakh levels in its current fall?International gold prices have fallen 26% from the record high of $5595 seen on January 29 this year. Indian gold prices peaked at the same time and are down around 23%.More recently, gold prices which rose to Rs 1,64,773/10 gm levels on MCX futures contract in the last week of August had fallen by more than 10% to a low Rs 1,45,991/10 gm levels last week.Spot gold closed around $4,130/Oz this week after pulling back from its August peak of $4,698.With gold now testing new key support levels, investors are asking how much deeper the correction could go. Let’s take a look:
Why are gold prices falling?
Several factors have contributed to the decline in gold prices from their record highs seen in January this year.To begin with, profit booking at higher levels led to a sudden crash in the yellow metal’s prices. Before they could stabilise, the US-Iran war broke out, sending crude oil prices above $120 per barrel, and stoking inflation fears.
Why are gold prices falling?
Recently, gold has come under intense selling pressure due to an unprecedented rise in real yields. The US Federal Reserve has hiked rates for the first time since 2023, and with inflation staying high, the probability of more hikes in the coming months has risen.As the US Federal Reserve pivoted from rate cut stance to rate hike, the US Dollar Index has strengthened more than 3% year-to-date. The real yields have risen 1.06% year-to-date, to their highest level seen in 24 years.This makes investing in US bonds more attractive as yields rise, in turn making gold, which is a non interest yielding asset, less attractive.
Will gold fall to Rs 1.25 lakh per 10 grams?
The worst may not be over yet. If the US inflation remains high, another leg of sharp decline in gold prices may be coming, say experts.As of now, markets expect one more rate hike by the year end and nearly three more hikes by the end of the next year.Some recent reports had suggested that the import duty on gold may be cut; however, given the weakness in the Indian Rupee and high oil and fuel prices, import duty cut may not happen anytime soon.
What Maneesh Sharma has to say on gold price fall
According to Praveen Singh, Head of Commodities at Mirae Asset Sharekhan, spot gold has a strong support in the $3930-$4000 zone.“Given that implied gold volatility is around 25%, there is a good chance of that support being tested. A decisive breach of this support zone will expose $3600-$3750 as the next possible support band, which is likely to hold as fundamental factors supporting the yellow metal are quite strong,” Singh tells TOI.“The probability of falling into this support region is around 25%. In Indian Rupee terms, gold may fall to Rs 134,000,” he says.But in its current phase of decline, can gold fall to Rs 1.25 lakh or even Rs 1 lakh per 10 grams level? “Gold slumping to Rs 100,000 would mean gold falling to $2800, which is somewhat improbable as structural backdrop of the shiny metal remains quite constructive on debasement concerns, de-dollarization, geopolitical tensions (especially between the US and China, the US’s foreign policy becoming more inward looking), strong buying by the official sector and financial repression,” says Praveen Singh.“If oil prices come down sharply and the Middle East situation stabilizes, import duty cuts may take place. In that case, we can see domestic gold becoming cheaper and price of Rs 125,000/10 grams could be realized; however, that would be very short-lived as sharp decline in domestic gold prices would spur gold demand and international gold prices would move higher; thus, pushing up the international gold prices. Thus, dips are likely to be aggressively bought on strong structural fundamental factors as listed above,” he adds.Commodity expert Maneesh Sharma believes that in case of fall in international gold prices, domestic gold might get support from depreciating local currency pair as the rupee is on the way to hit another all time high after rising to 96.30 levels against dollar in recent sessions.“Hence a fall in gold prices to near $4000/Oz might see MCX gold falling to near Rs 1,45,000/10 gm levels in futures contract,” he tells TOI.
What’s the outlook for gold prices in India?
The impact of the fall may be somewhat muted in India due to two main factors: import duties on gold continue to be high at 15%, keeping domestic prices relatively higher. Secondly, with the start of the festive and wedding season in India, an expected surge in demand is likely to keep prices stable.Experts say any decline in international gold prices will be mirrored in Indian gold prices, too.“As the Indian currency is weak, decline in gold prices coming on high oil prices and high yields will induce further weakness in the domestic currency, which would cushion the decline in domestic gold prices,” says Praveen Singh.According to Singh, festive demand for gold would act as a cushion rather than a factor taking gold prices sharply higher on a sustainable basis as gold prices remain high and somewhat volatile.
What Praveen Singh has to say on gold outlook
“Consumers are opting for lighter weight jewellery while rise in ETF investing is also a dampening factor for jewellery demand,” he notes.Importantly, the slide in gold prices may continue to find its set of anchors, experts say, adding that the fundamental outlook for gold remains intact.“There are several factors which can reverse the scenario of weakness in gold. These factors include re-escalation of US-China tensions, runaway inflation/unhinged long term inflation expectations, the US Administration compromising the Federal Reserve’s independence, debasement concerns coming to fore once again, de-dollarization gaining prominence as the US continues weaponizing the Dollar, US job market cratering, US economic growth coming under threat, the Iran war coming to an end, etc,” Praveen Singh says.According to Maneesh Sharma, as Indian buyers witnessed notable contraction in gold import demand in August due to higher duties, recent dip in prices has continued to lure buyers with Diwali season retail demand also expected to pick up this month.Also notable improvements in ETF flows have been seen since August while continued central bank purchases and concerns over the long-term sustainability of US fiscal deficits and high public debt could continue to provide structural support over the long term horizon of 6–9 months.“Hence expectations remain that the current correction in prices could continue in the immediate near term but could be seen as a healthy consolidation phase before the primary upward trend resumes later in the quarter,” he adds.He expects spot gold could still have room to fall up to $4025–3950 / Oz levels, which translates to a level of Rs 1,46,200–144,500/10 gm in MCX futures contact.“However a fall up to Rs 125,000/10 gm looks likely only in case US 10-year yields escalate further if a hot CPI Inflation print in US comes out in October, the probability of the same looks less likely as of now,” he says.With US President Donald Trump rejecting a recent Iranian proposal to resurrect a collapsed Gulf ceasefire, continued geopolitical conflict in October with further rise in US yields could temper gains in yellow metal and lead to another sharp correction in prices, caution experts.“However, focus on the potential support from India’s festive and wedding demand and central-bank purchases could again lead to prices unable to sustain below $4000/Oz levels in spot,” concludes Maneesh Sharma.(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)
