SYNOPSIS: Gold hit record highs amid rate-cut expectations, geopolitical tensions, and strong institutional demand. While analysts see potential for Rs. 1.5 lakh levels, the pace will hinge on global macro stability and demand dynamics.
Gold’s strong rally shows no signs of slowing down! On Monday, 22nd December, prices climbed to fresh record highs, with spot gold touching $4,383.73 per ounce. Often viewed as a safe-haven during periods of uncertainty, gold has surged nearly 67 percent so far this year. The global strength has spilt over into domestic markets as well, with gold currently trading around Rs. 1,38,100 per 10 grams in India.
The momentum has been equally visible in futures markets. MCX gold futures rose by Rs. 574, or 0.43 percent, last week to hit an all-time high of Rs. 1,35,590 per 10 grams on Thursday. This marked the fourth straight weekly gain and put gold on track for its 12th consecutive monthly advance.
What makes this rally particularly interesting is that it is unfolding alongside rising equity markets, defying the usual inverse relationship between the two asset classes. Indian equities continued to move higher, with the Sensex gaining 0.79 percent to 85,601.33 and the Nifty rising 0.82 percent to 26,180.7.
Key Drivers Explained
US Economic Signals and Rate-Cut Expectations: Gold extended its rally after fresh US economic data pointed to continued softness in the labour market, while easing inflation reinforced expectations of further monetary easing by the Federal Reserve. These signals pushed gold past its previous record of $4,381.52 set in October, as markets priced in a more accommodative policy outlook.
The Fed’s recent 25-basis-point rate cut has strengthened expectations of additional easing ahead. Investors are now expecting two US rate cuts in 2026, a backdrop that typically favours non-yielding assets like gold. As interest rates fall, the opportunity cost of holding gold declines, making it more attractive compared with bonds and fixed-income instruments.
Geopolitical Tensions: Rising geopolitical tensions have further enhanced gold’s appeal as a safe haven. Escalating friction between the United States and Venezuela, particularly reports of US action against oil tankers linked to Venezuela, has contributed to market unease. At the same time, tensions in Europe have intensified after Ukraine reportedly targeted an oil tanker linked to Russia’s shadow fleet in the Mediterranean.
Weaker Dollar: A softer US dollar index has further supported the rally, as gold becomes cheaper for overseas buyers when the dollar weakens. At the same time, investors are closely monitoring upcoming US macroeconomic data, which could influence the timing and scale of future rate cuts – and, in turn, gold’s next move.
Central Bank Buying and ETF Inflows: Gold prices have climbed nearly two-thirds this year, supported by sustained central bank purchases and rising inflows into bullion-backed exchange-traded funds (ETFs). According to industry sources, gold-backed ETFs have recorded inflows for five consecutive weeks. Meanwhile, ETF holdings have increased in every month this year except May.
Earlier in the year, gold also benefited from heightened political uncertainty, including aggressive moves by former US President Donald Trump to reshape global trade and public criticism of the US central bank, which raised concerns over policy independence and added to haven demand.
World’s Largest Consumers of Gold
According to data from the World Gold Council, China ranks as the world’s largest gold consumer, with annual consumption of ~630.2 metric tonnes. India follows closely in second place, consuming around 575.8 metric tonnes each year, reflecting the metal’s cultural and investment significance in the country. The United States ranks third with an annual consumption of about 136.9 metric tonnes, while Germany and Thailand complete the top five, with gold consumption of roughly 42.2 metric tonnes and 39.7 metric tonnes, respectively.
Will Gold touch Rs 1.5 Lakh anytime soon?
Kotak Securities’ Bullish View on Gold: Brokerage expects gold prices to potentially rise to $5,000 per ounce and remain elevated for a prolonged period, supported by a mix of economic and geopolitical factors. In its Market Outlook 2026 report, the brokerage also projects that gold prices in India could reach Rs. 1.5 lakh per 10 grams next year, reflecting sustained global momentum.
According to Kotak Securities, ongoing softness in the labour market and slowing nominal growth suggest that the Federal Reserve may continue on a longer-term easing path, even if inflation remains sticky near 3 percent. When combined with widening fiscal deficits across major economies, slower global growth, and rising geopolitical tensions, these factors are creating conditions for gold to stay in a “higher-for-longer” regime.
The report also flags potential downside risks to the US dollar, which are prompting both investors and central banks to increase gold allocations as a diversification strategy away from dollar-denominated assets. Emerging market central banks, in particular, are stepping up gold purchases, adding further support to price projections for the year ahead.
Kotak Securities noted that the core drivers influencing gold – monetary easing, fiscal stress, and geopolitical uncertainty – are expected to remain firmly in place through 2026 and beyond, reinforcing the long-term bullish case for the metal.
Industry Perspective – Senco Gold’s View: Echoing a similar outlook, Suvankar Sen, Managing Director and CEO of Senco Gold, believes there is a strong possibility of gold prices in India moving toward Rs. 1,50,000 per 10 grams, from around Rs. 1.3 lakh, provided global conditions remain supportive.
Sen highlighted that gold has posted gains every year so far and suggested that if prices stabilise around $4,100-4,200 per ounce, the historical trend of 20-25 percent annual appreciation could continue. Expectations of US interest rate cuts and rising global liquidity, he added, are likely to keep investor interest in gold and silver intact amid uncertainty in equity markets.
However, higher prices are beginning to impact physical demand. Sen noted that Senco Gold is witnessing a 7-10 percent decline in buying volumes, as consumers adapt to elevated gold prices. Buyers are increasingly opting for lighter jewellery and lower purities – shifting from 22-carat to 18-carat gold for plain jewellery, 14-carat for diamond pieces, and even 9-carat options for gifting – helping them manage budgets despite rising per-gram prices.
In a nutshell, gold’s sharp rally is being driven by a combination of monetary easing expectations, geopolitical uncertainty, central-bank buying, and a weaker dollar. While projections of Rs. 1.5 lakh per 10 grams appear achievable over time if global conditions remain supportive, near-term movements will depend on US rate actions, currency trends, and how sustained demand balances against slowing physical consumption at higher price levels.
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