Expert view: Kaynat Chainwala, AVP – Commodity Research, Kotak Securities, believes that volatility in gold and silver prices is likely to persist in the near term, driven by elevated oil prices, which have pushed inflation expectations higher, keeping the dollar firm and raising the opportunity cost of holding non-yielding assets.
In an interview with Mint, Chainwala further said that the government’s recent import restrictions and customs duties hike can slow dollar outflows; however, the ability to meaningfully stabilise the rupee is limited, especially if global dollar strength persists or foreign capital inflows remain weak. Edited excerpts:
Can the government’s import duty restriction on gold and silver contain outflow of the US dollar and free fall in rupee?
The duty hike on can help slow dollar outflows in the near term, because higher duties and tighter controls usually cool import demand and reduce the immediate pressure on the current account. However, its ability to meaningfully stabilise the rupee is limited, especially if global dollar strength persists or foreign capital inflows remain weak. More importantly, India’s external balance remains far more sensitive to crude oil prices than to bullion imports. So, gold and silver can amplify the pressure, but crude is still the main swing factor as energy imports remain the dominant driver of dollar outflows. As long as crude prices stay elevated and disruptions around the Strait of Hormuz continue, the rupee is likely to remain vulnerable despite higher bullion duties.
Will the recent restrictions impact retail behaviour?
The impact should be visible fairly quickly. Higher local prices typically push buyers to delay purchases, buy lighter jewellery, or shift allocation toward ETFs or digital . But this is demand deferred, not demand destroyed. India has experienced similar cycles before, with duties raised in 2012–13, increased again in 2022, and subsequently reduced in 2024. On each occasion, physical demand weakened temporarily before gradually recovering. The current restrictions are therefore more likely to alter the timing and form of demand rather than eliminate it.
Both gold and silver have remained highly volatile since the onset of the US-Iran war. Are metals losing their shine as safe-haven assets?
Not structurally, but their behaviour in this cycle has been less straightforward. The war itself has created conditions that work against gold: elevated oil prices have pushed inflation expectations higher, keeping the dollar firm and raising the opportunity cost of holding non-yielding assets. Liquidity stress has also periodically forced sales of gold and silver for cash. That said, global gold demand hit a record in Q1 2026, with bar and coin demand up 42% year-on-year. Central bank buying has continued uninterrupted. Those are not the patterns of an asset losing its monetary credibility.
From a macroeconomic standpoint, what is the single biggest trigger for bullion that will set the definitive direction for the rest of the year?
De-escalation carries the greater directional significance for bullion prices this year, although the Federal Reserve will determine the extent of any sustained move. Continued conflict keeps energy prices elevated, reinforces inflationary pressures, limits the Fed’s flexibility, and supports the US dollar. Markets are currently pricing in roughly a 40% probability of a rate hike before year-end, which continues to cap upside momentum in bullion while the Strait remains constrained. A reopening of the Strait would materially ease that pressure. In this environment, the Fed defines the macroeconomic backdrop, while geopolitics determines the market direction.
How much more volatility in both gold and silver can we expect in 2026?
Volatility is likely to remain elevated and potentially exceed levels markets have become accustomed to in recent years. The combination of an unresolved conflict, a contested Fed policy path, and India’s duty shock has significantly reduced visibility across asset classes. should prove the more stable of the two, supported by deeper liquidity and institutional ownership. Silver is the more erratic as its additional sensitivity to industrial demand makes it responsive to global growth expectations on top of the monetary and geopolitical drivers. In this environment, risk management takes priority over conviction positioning.
Can both bullions touch new record highs this year?
Both metals have already set records this year and pulled back sharply. Gold’s all-time high stands at $5,585 against a current price near $4,532. Silver hit $121.6 before pulling back into structural consolidation. Although fresh highs remain achievable, sustained upside is unlikely while elevated energy prices continue to fuel inflation concerns and keep the Federal Reserve cautious. The stronger monetary tailwind required for another extended rally in bullion is unlikely to emerge until those pressures begin to ease.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.