Gold and silver prices fell sharply after hitting record highs earlier this year. Silver dropped over 50% from its peak of Rs 4.20 lakh per kg. Ponmudi R, CEO of Enrich Money, said, "the ongoing decline appears more like a normalization of valuations rather than a structural collapse."
Gold and silver have endured one of their most volatile starts to a year in recent years. Gold surged to record highs in January, crossing Rs 1.75 lakh per 10 grams, before suffering a sharp correction. Silver, one of the standout performers of 2025, rallied 71% in the first two months of 2026 to hit a fresh high of Rs 4.20 lakh per kg, but has since fallen more than 50% from the peak.
The sharp reversal comes as renewed tensions over the Iran war push oil prices higher, fuelling concerns about inflation and raising expectations that the US Federal Reserve could increase interest rates later this year. At its latest meeting, the Fed did just that, raising rates for the first time in three years.
The timing is significant for Indian markets, with Dhanteras approaching, followed by the festive and wedding seasons, when gold buying typically gathers momentum. Gold holds special significance during Dhanteras and Diwali, as many Indian households consider purchasing the yellow metal on these occasions auspicious.
For consumers planning festive purchases and investors considering gold exchange-traded funds (ETFs), the correction raises two key questions: whether lower prices offer an opportunity to buy and how much exposure precious metals should have in a portfolio.
Decoding the gold, silver fall
Gold has come under pressure from a stronger US dollar, elevated Treasury yields and shifting expectations around US monetary policy. Higher yields make interest-bearing assets relatively more attractive than gold, which does not generate regular income.
Live Events
US consumer inflation climbed to 3.7% in September from 3.4% in August, according to the Bureau of Labor Statistics on October 14. Gasoline prices jumped 9.1% during the month, accounting for more than half of the overall increase.
Higher interest rates weigh on both metals because neither offers an interest income. As returns on safe US government bonds rise, the opportunity cost of holding bullion increases. A stronger dollar adds to the pressure by making dollar-denominated metals more expensive for buyers using other currencies.
Profit booking has also contributed to the correction. Gold's remarkable rally earlier this year, following a 66% surge throughout 2025, left prices at record levels. As volatility increased, investors moved to lock in gains.
"In that context, the ongoing decline appears more like a normalization of valuations rather than a structural collapse in the asset class," Ponmudi R, CEO of Enrich Money, said.
Time to buy ahead of Dhanteras?
For Indian investors, the festive season could offer an opportunity to accumulate gold gradually rather than make aggressive purchases, according to Ponmudi.
Festive sentiment can support physical demand, but domestic gold prices are also shaped by international prices, the rupee and domestic premiums. A weaker rupee can cushion the impact of falling global prices, while an appreciating rupee can limit the recovery in domestic prices.
“Investors should avoid deploying their entire allocation at one price. A staggered buying approach is more sensible, particularly after such a volatile correction. Jewellery purchases should be based on personal requirements, while investment decisions should consider price, liquidity and the overall portfolio allocation,” he said.
Nirprendra Yadav, analyst at Bonanza, echoed this view, advising investors against trying to identify the exact market bottom or committing their entire allocation in one go. For those looking to hold gold over the long term, staggered purchases can help manage volatility and reduce the risk of poor entry timing.
Consumers buying jewellery for Dhanteras or weddings can use the correction to meet their requirements. Financial investors, however, should assess their existing exposure, investment horizon and risk tolerance before adding to their holdings.
Gold and silver outlook
“In the near term, precious metals remain constrained within a tight range. The dominance of firm US bond yields, sticky global inflation, and aggressive global central bank liquidity management limits upside momentum,” Pinky Yadav, Fundamental Commodity Analyst at Choice, said.
With around 7-8 weeks left in the year, seasonal patterns could provide some support. November and December have historically been favourable for gold, while December has often been a stronger month for silver. However, market liquidity typically thins out after Christmas.
Experts expect gold to remain relatively resilient, supported by central-bank demand and geopolitical uncertainty. Silver, meanwhile, could see a stronger recovery amid robust industrial demand from the solar sector, although its price movements are likely to remain significantly more volatile.
“Overall, my outlook remains cautiously constructive on both metals. The Fed meeting, US midterm elections and upcoming NFP data will be key near-term catalysts. For investors, phased accumulation is a prudent approach, while speculative traders should wait for clear trend confirmation before taking aggressive positions,” Vandana Bharti, Head of Commodity Research at SMC Global Securities, said.
HSBC believes silver prices are close to fundamentally justified levels and remains mildly positive on the metal. Industrial and jewellery demand is expected to weaken further, but institutional purchases, particularly from China and India, are likely to support demand for large bars. Demand for coins and small bars could also recover, although at a moderate pace as high prices continue to weigh on buyers. Silver ETFs, which recorded outflows earlier this year, are rebuilding their holdings.
However, HSBC's outlook also flags risks. A firm US dollar, as forecast by HSBC FX Research, and elevated bond yields could limit price gains. If the anticipated interest rate hikes fail to materialise, silver could move higher. Fiscal profligacy and geopolitical risks are also expected to provide support.
On the supply side, silver production is expected to increase despite challenges in expanding mine output at elevated prices. Most mined silver is produced as a by-product of gold and base metals, limiting the industry's ability to respond rapidly to higher prices. Lower ore grades and mine closures this year are expected to be largely offset by new projects and capacity expansions. However, mine output is likely to rise significantly in 2027, HSBC said.
In the near term, gold is likely to remain volatile, with further consolidation or additional declines possible if US bond yields and the dollar stay firm. The Federal Reserve's October 27-28 meeting, its guidance on future interest rates, inflation data, crude oil prices and geopolitical developments will be important triggers.
A sustained moderation in bond yields and a revival in investment demand could support a recovery. Conversely, persistent inflation and expectations of tighter monetary policy could delay a rebound.
For the remainder of 2026, precious metals are likely to remain highly sensitive to interest-rate expectations, movements in the dollar and global risk sentiment. Gold is expected to retain its strategic appeal as a long-term portfolio diversifier, although a sustained recovery may take time to emerge. Silver offers greater recovery potential on the back of its industrial demand and supply dynamics, but its higher volatility makes it a riskier proposition.
(You can now subscribe to our ETMarkets WhatsApp channel)
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...moreless
(You can now subscribe to our ETMarkets WhatsApp channel)
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...moreless
KYC and KYB: Inside Damani’s DMart, the retail chain for the middle class. And stock for the long term? – Part 2 of 3
Will it be a regulatory nightmare if an exchange lists on its own platform?
KYC and KYB: Inside Damani’s Avenue Supermarts that refuses to charge more – Part 1 of 3
Will oil turn into a lingering problem? Is the world economy, India, or the market prepared?
KYB and KYC: Business behind the wealth creator called ‘Divi’s Lab’ – Part 2, concluding