Gold’s spectacular rally has gone into reverse. After touching an all-time intraday high of Rs 1,92,991 per 10 grams on the Multi Commodity Exchange (MCX) earlier this year, the precious metal is now trading at around Rs 1,43,610, erasing nearly Rs 49,400 in value, a correction of about 26%.
The sharp fall has left investors and jewellery buyers wondering whether the worst is over or if prices could decline even further.
Gold surged to record levels earlier this year as investors rushed to safe-haven assets amid rising geopolitical tensions, concerns over global economic growth and expectations that major central banks would begin cutting interest rates.
Escalating tensions in West Asia, central bank purchases and a weaker US dollar also helped fuel the rally, taking gold to an unprecedented high on the MCX.
However, those factors have now taken a back seat.
The biggest reason behind the correction is the changing outlook for US interest rates.
Markets now expect the US Federal Reserve to keep borrowing costs higher for longer, with traders pricing in three rate hikes this year and nearly an 80% chance of another increase in December.
Higher interest rates because the precious metal does not generate any income. As bond yields rise, investors tend to shift money away from gold and towards interest-bearing assets.
The US dollar has also strengthened, making gold more expensive for overseas buyers and adding further pressure on prices.
Gold is now headed for its fourth consecutive monthly decline, with international prices expected to end the month more than 10% lower.
Normally, geopolitical tensions boost demand for gold as investors seek safer assets.
But this time, the market has been more focused on the inflationary impact of the conflict than on the conflict itself.
Fresh military strikes between the US and Iran over the weekend briefly pushed crude oil prices higher. However, hopes that Washington and Tehran will continue diplomatic talks over the Strait of Hormuz have limited safe-haven buying.
Instead, higher oil prices have reinforced concerns that inflation could remain elevated, increasing the likelihood that the Federal Reserve will keep interest rates high.
According to Axis Securities, gold managed to recover modestly after the latest US PCE inflation data broadly matched market expectations. However, the brokerage said the precious metal remains under pressure as the Federal Reserve continues to maintain a hawkish stance, supporting the US dollar.
Dr. Renisha Chainani, Head of Research at Augmont, said gold has now declined for four consecutive weeks and is down nearly 30% from its January 2026 all-time high internationally.
“The hawkish stance of the US Federal Reserve, inflation remaining above target and expectations of three rate hikes this year continue to be the biggest headwinds for non-yielding assets like gold,” she said.
She added that while the recent US-Iran conflict briefly revived safe-haven demand, the rebound was short-lived as investors shifted their focus back to inflation and monetary policy.
Gaurav Garg, Research Analyst at Lemonn Markets Desk, also attributed the weakness to easing geopolitical tensions.
“The recent easing of US-Iran tensions contributed to the sell-off, as investors shifted their focus to economic indicators that could influence the Federal Reserve’s policy in the coming weeks,” he said.
Analysts believe the next move in gold will largely depend on US economic data and the Federal Reserve’s policy trajectory.
Dr. Chainani said investors should closely watch this week’s US non-farm payrolls report and ISM Manufacturing PMI data.
“A meaningful cooling in labour market conditions or softer-than-expected inflation could provide relief to gold and potentially push prices towards the $4,100-$4,150 range. However, a strong jobs report could see gold retest the key $4,000 support level,” she said.
According to her, COMEX gold has immediate support between $3,950 and $4,000. If prices fall below that range, gold could decline further towards $3,600. On the upside, resistance is expected around $4,250.
Tim Waterer, Chief Market Analyst at KCM Trade, believes gold could revisit the $5,000-an-ounce mark later this year, but only if oil prices retreat to pre-conflict levels, inflation concerns ease and the US dollar weakens.
For jewellery buyers, the nearly Rs 50,000 correction from the peak has brought some relief after months of record-high prices.
However, analysts caution that gold is likely to remain volatile in the near term as markets react to developments in the Middle East, upcoming US economic data and the Federal Reserve’s interest-rate decisions.
For long-term investors, gold continues to serve as a hedge against uncertainty. But in the short term, its direction will largely depend on whether inflation cools enough for the Federal Reserve to soften its stance or whether interest rates stay higher for longer.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)